Liquidity-when he requires the amount to meet the educational expenses of children,for marriage, house construction or for a secure future after retirement. Security of the investment. The return and tax on income on such investments.
This varies from person to person. A person by investing in NSC saves on his tax. However, the interest on the investment is taxable. Again, if the investment is made in PPF, he is not liable to pay the income tax on interest. But the period of NSC is six years whereas in the case of PPF the period of repayment is 5 years. However, a portion can be claimed after 7years. Thus the person who makes the investment has to consider whether he requires the amount after 5 years or he can wait for a longer period.
To make investments there should be savings. A lower income person also wants to save, but his gross income and day-to-day expenses dont leave him anything to save. For example, if he has to save Rs 20 from tax by investmenting in NSC, he has to invest Rs 100. Sometimes considering his financial needs he will be prepared to pay the tax of Rs 20, so that Rs 80 is there for his other needs. Therefore, the capacity of savings is also very relevant. To increase savings one should make investments that give reasonable returns. Again this return becomes a saving if invested. This booklet talks about the deductions available under various head such as salary and house property and also various modes of investments and tax deduction available from the said investments. The rebates, concessions and-liability of tax in this article are with reference to the assessment year 2001-2002 (financial year April 1, 2000 to March 31 2001). The amendments made by the Budget 2001 are also touched upon in brief.
Tax planning should be an important component of your overall financial plan. Careful planning is the key to successfully and legally reducing your tax liability. There are proven strategies for reducing taxes for individuals and families. We proactively recommend them to maximize your after-tax income. We make it a priority to be up-to-date on changes in the tax laws, complexity of the tax code, and new tax regulations. We continually look for ways to minimize your tax liability taking into account all deductions allowed while using modern tax preparation software.
As you start chalking out your savings and spending, begin investing as well. The idea again is to begin as early as possible.
Investing early gives you a head start and multiplies your savings manifold. For instance, if you invest in a SIP of Rs 5,000 having a nominal rate of 12 per cent, your returns after 10 years will be approx. Rs 11.61 lakh (with Rs 6 lakh invested).
A year later, while your investment will be Rs 6.60 lakh, your returns are going to be worth Rs 13.73 lakh. Five years down the line, you will have Rs 29.06 lakh with just Rs 9.6 lakh invested - or with returns worth more than three times your original investment. A single year of difference at this point changes your return by Rs 4 lakh approximately.
Your investments may vary depending on your child’s needs. Hence, it is essential to continually evaluate and realign the plan as per the changes. But, what should remain constant is your long-term vision is what truly matters to your child.