INVESTMENT MATTERS

SAJJAD BAZAZ

Maddening moments for investor
This is the time to invest in tax saving instruments. Rajiv Gandhi Equity
Saving Scheme (RGESS) extends tax incentive to fresh investors

SOME maddening moments have started for the investors. This is the time when almost everyone, whether he’s a businessman, an entrepreneur or an employee, gets automatically busy in financial planning to scissor income tax. Those falling in the income tax net once again gear up to make these maddening moments a very sane one.
 The other side of the picture is that if it is worrisome time for employees on account of income tax liability, it is merry making time for various media channels, as they get some extra ad business highlighting income tax saving options of various financial institutions. Even exclusive editions/ programmes sponsored by some companies about the ‘best’ tax saver options available in the market.
 Let the investors understand that as far as tax saver instruments are concerned, there are certain things in which government wants its citizens to invest. Some of the things that the government wants them to invest in are for their own good, while there are other things, which are for the welfare of the nation. So to encourage people to invest their money in the “these certain things” the government exempts them for income tax.
 However, the key is to understand how tax-saving investments could fit into ones finances and adopt approaches that will help to choose the right tax-saving investments. So, the basic thing in axing the tax is choosing the right kind of tax saving investment option and there are legal ways of paying less tax than what one is supposed to pay. And this way is through “investments”. If one invests part of his income into government bonds, infrastructure bonds, life insurance, bank fixed deposits etc. then ones income will reduce. This means he has to pay less income tax.
 The investment in these tax saving things does not just go away. One is actually creating an asset that produces money. So, instead of losing the earning power of the money by paying income tax, one could use the money to create an asset and also save tax.
 Investors who fall in the tax net should take route of the provision of new section 80CCG (Rajiv Gandhi Equity Saving Scheme, RGESS). Under the scheme, tax incentive is being made available in the Income-tax Law in terms of the provision contained in section 80CCG whereby first time investors in the stock market can go in for making investment up to Rs. 50,000 and enjoy a tax deduction equal to 50 per cent of such investment.  Thus, tax saving can be made by taking an exposure to Rajiv Gandhi Equity Investment Scheme and thereby cutting down your tax payment by Rs. 2,500 to Rs. 5,000. This option has been introduced for the first time in the equity market and is available only for a new investor. In other words if you are holding some shares then you cannot take advantage of this new scheme of 80 CCG.
 Now you as an existing investor must be thinking to take benefit of the scheme in the name of your any family member. Let it be clear that investing through this mode is not going to help you to save tax. Even as there is an option for you as an existing investor to make indirect investment in the name of your family member in the stock market, the saving cannot benefit you.
 Precisely, Rajiv Gandhi Equity Savings Scheme is an option for those tax payers who have never had any exposure in the stock market. So if you are yet to board the stock market bus, let this new year be your first year in the stock market as an investor. The first ladder to enter the stock market is to open a Demat Account in your name.
 Notably, investors, who are tax payers, with an income of more than Rs 10 lakh don’t fall under this tax saving scheme.
 So I would say that it’s up to you to turn your these maddening moments into pleasant moments if you establish your tax planning strategy, which should essentially be linked to your medium- and long-term financial goals, right now. In other words, if you want to strike a right balance between your investment growth and tax management, then it is important to start right away.
 In succinct, a word of caution for those who fall in the income tax bracket. Make your general investments in tax- efficient instruments. Be punctual in making your tax investment declarations to your employer supported by your investment proofs. To axe the tax, consult a good tax consultant before taking any major financial decisions. Maintain your yearly financial documents properly and fulfill all compliance requirements, such as timely filing of tax returns. After all, free of tax worries means peaceful life.
(The views are of the author & not the institution he works for.
Feedback atsajjadbazaz@greaterkashmir.com)

Lastupdate on : Sat, 5 Jan 2013 21:30:00 Makkah time
Lastupdate on : Sat, 5 Jan 2013 18:30:00 GMT
Lastupdate on : Sun, 6 Jan 2013 00:00:00 IST




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