Page 18 - Life Insurance Today December 2017

X Section 80DD and 80U are for disabled people. The Tax benefits with Mutual funds
former allows deductions when the individual
When it comes to exemptions, mutual fund investments
isdifferently-abled, while Section 80U allows
also have certain tax exemptions:
deductions in case a family member is a disabled
X The dividend payouts from the mutual fund house are
person.
tax exempted.
X Section 80DDB allows you to claim deductions on
X Equity funds are exempted from tax if you sell it after
payments made for treatment of specified diseases.
12 months.
The patient could be an individual or a dependent.
X When it comes to debt funds, they don't offer
X You could even claim deductions for interests paid on indexation. Instead, they offer the benefit of
your, your spouse's or your children's educational double indexation. (Indexation is when you adjust
loans under Section 80E. your purchase price for inflation using a Price

X There are also provisions that allow you to claim Index. Say, you buy a debt mutual fund on March 29
deductions on donations. Section 80G is for general of a year and sell it on April 3 of the next year.
donations, while Sections 80GGA, 80GGB and 80GGC Your investment spans two financial years, while
are for different categories of donations. your actual holding period is only 1 year 5 days. This
is how you could explore the option of double
X Even the rent you pay can be claimed under Section
indexation.
80GG.
Importance of early tax planning
Tax-exempted incomes
December to March is considered to be the tax season.
While there is a limitation to the amount of deductions
However, tax planning needs to be a continuous process.
under each section, there is no limit when it comes to tax In fact, like investments, the earlier you start planning for
exemption. If you wonder whether there are some
your taxes, the better. With early tax planning, you could
incomes that are exempted from taxes, the answer is yes!
span your tax-saving investments throughout the year
For example, your pension is exempted from taxes,
instead of making a lumpsum investment.
whether commuted or uncommuted. Salaried individuals
even get exemptions for house rental allowance (HRA),
With early tax planning, you could truly explore the
leave travel allowance and leave encashment. The gratuity
potential of rupee cost averaging and power of interest
that you get when leaving a company is also tax exempted.
compounding. Thus, you not only save taxes but also see
your money grow if you invest for the long-term.

Additionally, with early tax planning, there are greater
chances of youeffectively utilizing the tax ceiling of Rs 1.5
lakh under Section 80C. Planning your taxes in advance
gives you more time to optimize and rectify your errors,
if any. That's because last-minute planning can turn out to
be a damp squib, i.e., your returns might not be as good
as your expectations.

Bottom line
Taxes play a vital role in any nation's success. That said,
these tax-saving tips can help you save money at the end
of the year. You could invest in mutual funds and claim tax
exemption and deduction (in case of ELSS). T

“Nobody ever wrote down a plan to be broke, fat, lazy, or stupid. Those things are what happen when you don’t have a plan.”

18 December 2017 Life Insurance Today

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