Tax Planning & Management FAQs

Tax Planning & Management FAQs

1) Tax filing is not part of tax planning and management. True or false?

a) True

b) False

Correct Answer: False. Tax filing is an important aspect of tax planning. This also helps you audit your finances for tax.

2) It’s better to plan taxes after investing

a) True

b) False

Correct Answer: False. Always plan your taxes before you plan to invest. There are various methods of tax planning you can use. One of the things tax planning does is identifying the tax bracket you fall in. This can help you choose investments that are tax-efficient as per your IT slab rate.

3) The concept of tax planning involves deduction and exemption. What is the difference between tax deduction and exemption?

a) Tax deduction is when you get tax-free income; tax exemption is when an expense helps you lower your taxable income.

b) Tax deduction helps lower your taxable income; Tax exemption is when an income is tax-free and thus, not a part of your taxable income.

Correct Answer: B. Tax deduction is when you make an investment or an expense that lowers your taxable income. An exemption—as the name suggests—is when something is not taxable to begin with.

4) Various types of tax planning and tax-saving investments help you…

a) Build your retirement kitty

b) Buy a house in the next 2 years

Correct Answer: Tax-saving investments have lock-in periods of 3-15 years. This helps them compound returns and thus grow money in time for retirement. It may not help a short-term goal.

5) Tax planning in India means investing in options that get you a tax deduction of up to Rs 2 lakh

a) True

b) False

Correct Answer: False. Tax planning also includes other aspects like reducing your taxable income, looking for tax-efficient investments, etc.

6) Which of the two Equity-based investments get you only tax exemptions, not deductions?

a) National Pension Scheme

b) Equity Funds

Correct Answer: NPS. All Equity Funds don’t get you a tax deduction. Only ELSS—a type of Equity Fund avails tax deductions under Section 80C. NPS, meanwhile, helps you lower your taxable income.

7) Those in the lower income tax slabs feel dividends are more tax-efficient.

a) True

b) False

Correct Answer: False. The DDT is over 28%. Such investors may find income sources that are taxed at their income tax slab rate of 5-20% or lower to be more tax efficient.

8) Members can receive a salary from the HUF. But this is taxable.

a) True

b) False

Correct Answer: False. You can receive a salary as a member, but it is tax-free.

9) Can expenses get you an income tax exemption?

a) Yes

b) No

Correct Answer: No. Income tax is generally levied on income—either through service, business or investments. You can only get tax deductions on expenses, not exemptions.

10) Which of the two is more tax-efficient at the final payout stage?

a) Life insurance

b) National Pension Scheme

Correct Answer: Life insurance payouts are tax-free. Meanwhile, withdrawals from NPS funds are taxable as per your IT slab rate.


How did you score?

0-3: You may want to read through and understand the chapter on Tax Planning once again. Or, speak to one of our experts for better understanding.

3-6: You’ve half-way there on your goal towards minimal taxes. But continue the efforts to be great at tax planning.

6-9: Very good. Go back to the few wrong choices and read those chapters better.

10: Congratulations! You are ready to make a tax plan of your own. Run it past one of our Tax planners for better chances of success.

Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing


What is Financial Planning

When it comes to financial planning and wealth management, most of you believe that creating savings is all that you require for fulfilling your financial plan. It is a misconception. What is personal financial planning? A personal financial planning process encompasses a wide range of activities which you need to carry out in order to achieve financial independence. It does not stop at savings. Do you know what these activities are? Many of you, sadly, don’t! As it is essential, let’s understand financial planning and what it involves –What is financial planning?Financial planning is a process wherein you make financial decisions to meet the different financial goals of your life by managing your finances. Thus, financial planning involves making sensible and practical decisions about your money for future goals, not just creating savings.What does financial planning involve?Financial planning is a six-step process wherein you can plan for your finances and achieve financial independence. Let’s look at what are the six steps in the financial planning process– 1. You should estimate your current net worth – you should analyse and find out your assets and liabilities to arrive at your net worth. Your assets are your investments and other owned belongings which give you an income. Liabilities, on the other hand, are the debts which you have to pay off. Your liabilities should be deducted from your assets to find out your current financial standing. This is called your net worth which you should know. 2. You should chalk out your goals – goals are important as they dictate how much to save and for how long. A strategic financial planning process involves planning around some common goals such as marriage, child education, asset creation, buying a home, wealth maximization and retirement. Chalk out your goals based on your life stage. If your children are independent, your goal might be to create wealth and plan for retirement. On the contrary, if you have just started a family, planning for your child’s future might be an important goal. So, list out your goals to understand your financial requirements. 3. Find out your financial requirement – your goals help you find out the amount of money you need in life. Segregate your goals into short, medium and long-term to find out your investment horizon. Then choose investments whose tenure matches the horizon of your goals. . With goal planning, you can see when you need the money and invest accordingly. Don’t forget to factor in inflation. It has a direct bearing on the amount of money required to fulfil your medium and long-term goals.4. Create a budget and stick to it – The next step is finding out your disposable income. Until and unless you know the income you can direct towards savings, you cannot create a portfolio. For maximum savings, create a budget. When spending, stick to your budget to avoid overspending. Budgeting helps you save more and meet your goals successfully. 5. Understand your risk appetite to know your investments – different investments have a different risk profile. Understanding of your risk appetite is important to find out in which assets you can invest. To understand your risk-taking ability, factor in your dependents, age, income, existing investments, etc. Once you know your risk profile you can choose equities if you are a risk taking investor or debt investments if you are risk-averse. Once you know your investment horizon and risk appetite you should pick the investment avenues. Some common and popular investment avenues include equity, debt, fixed-income, real estate, gold, etc. when picking assets, don’t stick to one asset class. Diversify. Diversification would help you spread your risk over different investments and minimize it. The returns, however, would be better. 6. Monitor and review your portfolio – financial planning is not a one-time affair. You need to monitor and review your portfolio from time to time. With time your financial requirements change. Your financial plan should be changed to factor in the change of your requirements. Conclusion Financial planning is a broad concept, an ongoing process and confusing it with only one factor of savings is wrong. Understand the entire financial planning process, follow it and achieve financial freedom.DisclaimerInvestment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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What is tax planning?

As an honest citizen of the country, it is your duty to pay your taxes. However, every investor is looking to save as much tax as possible. This can be made possible through tax saving investments. The need of tax planning is absolutely necessary to save a substantial amount of your finances. This is because taxes can eat a big chunk of your total investment returns every year. Therefore, through proper tax planning, you can create a strategy that allows you to minimise your tax liability every year.What is tax planning?Tax planning is a process of analysing and evaluating an individual’s financial profile. The aim of this activity is to minimise the amount of taxes you pay on your personal income. In short, employing ways that the government has provided to save tax is a perfectly legal method to cut down your annual tax liability. There are a number of tax saving investments in India that are useful in saving money.What constitutes tax planningThere are three key characteristics of tax planning—investing to reduce taxes; planning your finances in such a way that you attract the least amount of tax, and the process of tax filing. As a result, tax planning affects all aspects of your money matters. Let’s understand this better:Tax saving opportunities available for everyoneThere is a whole range of income tax sections that allow you to legally benefit from tax-saving. A popular and easy avenue for taxpayers to avail tax deduction is to employ Section 80C of the Income Tax Act. Section 80C can allow you to claim a deduction of Rs 1.5 lakh on your taxable income.However, there are a lot of other sections that can offer you huge tax benefits. Some of the provisions in the Income Tax Act are: Sections 80D, 80DD, 80EE, 80G and 24(b). Not many people are not aware of all the tax-saving options available to them. For instance, did you know that under Section 80G, donations made to certain charitable organisations are eligible for tax deductions?Taking tax-efficient decisionsThere’s more to tax than investments. It affects every single aspect of your life—from salaries and income sources to expenditure to financial decisions. And this is a key aspect of tax planning—it helps you make decisions that lower your tax burden. For example, let’s say you have to choose between two investment options. A tax planner helps you choose the best option while keeping in mind both returns as well as tax efficiency. Another example is ensuring your income is structured in the most tax-efficient way. Tax audit and filingThe last key aspect of tax planning is the actual tax filing. This is when you take into account all aspects of your finance—income, expenses, debt, and investments—and then calculate your tax liability. Then, there’s all paperwork and documentation involved in paying your tax and filling your tax returns. How IndiaNivesh can helpOur Wealth Management team is well equipped to help you plan your investments while keeping in mind the taxation aspects. This can help you grow your wealth and save tax at the same time. Click here to know more about our Wealth Management division.In conclusionAs taxpayers, knowing and being aware of all kinds of taxes can help on planning the financial year well. This will not only help you save more money, you can also create a better financial plan for your family. That’s why it is very important to make sure you have a tax plan in mind whenever you plan to invest your money.DisclaimerInvestment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing

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