Gold Investment for Tax Free Retirement

Gold Investment For Tax Free Retirement

Invest in gold as it has edge over equities: Investment in gold works both in hedge market fluctuation and inflation. Gold prices are less volatile than equities and gold gives a good return even in falling markets. Gold can be bought in physical form or in the form of ETFs (Exchange Traded Funds).It is easier to buy, hold and sell gold in ETF form. In case you don’t have a demat account, then gold funds are also available like other mutual fund units through SIP. Investment in gold is tax efficient too. As there is no income during the holding period, the tax liability is nil. You can also take a loan against gold as security for temporary needs at a reasonable rate of interest within minutes. If you need to sell, then the long term capital gain tax rates are also lower than normal rates. Moreover the cost of purchase gets increased by inflation index. Thus zero tax liability in holding while your money is appreciating more than the rate of interest or inflation in general and lower tax liability in case of sale also – that’s the advantage of buying Gold.Buy gold for long term needs, happiness and security. Buying gold coins from banks or MMTC at a premium from market price does not help. You may not be able to sell it at a premium too – your sale might be below the market price. Hence buying in ETF form is best or buy jewellery, to make your loved ones happy.

Buy gold for

long ter

What are taxabe income

What are taxable income?

All income needs to be reported, whether exempt from income tax or not. Interest earned

on bank accounts (savings and FD) are generally not reported due to misconception. Interest

income, including accrued interest on NSC is taxable. Money received due to compulsory acquisition of land is also taxable. Even the rent received from cell phone tower on roof of your

house is taxable!Long term Capital gain on stocks and mutual funds is not taxable, but still needs to be reported under exempt income in ITR2 form. TDS is deducted on your estimated income at rates specified by the Income Tax Department.However, your actual income may be

higher or lower. Therefore, you have to compute your tax liability at the end of the financial year.

Depending on your income and TDS deducted,you may have to pay more taxes or you may be

eligible for refund.In case you have refund due from income tax, do not forget to mention bank details in your Income Tax Return.Returns after taxes are not good to beat the inflation, hence there is a negative growth in your money. For example the actual/average inflation rate is 10% and F D interest after tax is 6% than your money has negative growth of 4%. Direct tax code has excluded these tax saving investments. Now, superannuation funds,provident funds and pension funds are allowedfor deduction.

Reverse Mortgage

What is Reverse Mortgage?

Reverse mortgage your home for nex 15 years after retirement and get tax free monthly cash flow from banks/ Housing Finance Companies to cover regular expenses. This is the opposite of taking a home loan at the time of purchase or construction of home. You can live in the house for life. You need not repay the loan amount the legal heir may get the house back after paying the outstanding loan amount. How to build it: To start with, buy home through home loan for 15/20 years during your service and start disciplined retirement planning. Start with a small house, say ` 10 lakhs, instead of waiting. You can buy a bigger house after 5 years for self use, in case the corpus needs to be increased and the standard of living is improved. There is no income tax liability as there are no rentals. Rather, you save tax on interest paid amount. The capital gains on sale of house are not taxable if invested in another house purchase. Over time, real estate has given inflation adjusted returns. Hence, it makes sense to buy a house taking

a loan instead of adding in fixed deposit for buying a house later. This may have to change after the DTC kicks in. A major game changer for life insurance is that the tax deduction limit will get reduced from the present ` 1 lakh a year to only ` 50,000 a year under the DTC. That’s not all. This ` 50,000 limit would also include the amount paid for tuition fees of children as well as medical insurance. Hence, there won’t be too much head room left for a big premium paid on an insurance policy. There are other things to keep in mind too. Insurance agents like to lure buyers by saying they can withdraw from their Ulips after a few years. This lock-in period used to be three years but the Insurance Regulatory and Development Authority has extended it to five years. Nonetheless, it is a widely used ploy to sell Ulips because partial withdrawals are tax-free. Right now, any income from insurance is tax-free except the premature surrender of a pension plan or a Ulip before five years. But under the DTC, withdrawals from Ulips will attract capital gains tax on the basis of the holding tenure. If you still want to buy an insurance policy to save tax, make sure that the life cover it offers is big enough. This would be possible if you take long-term plans (at least 20 years). Your agent might try to dissuade you from opting for a higher risk cover in your Ulip. He would point out that a higher deduction for mortality charges would reduce the funds available for investment. Don’t let that make you opt for a plan that

might lose all tax benefits two years from now. For investors who are comfortable taking

risks, equity-linked saving schemes are a better way to save tax. These funds have given high returns in recent years and have a lock-in of only three years, which is the shortest for any Section 80C option. But being equity- oriented funds, they are subject to market risks and one

should enter only if he can stomach the ups and downs. For those with a lower risk appetite,

the New Pension Scheme (NPS) is a great way to save tax. NPS investors have the choice

of investing in funds managed by six mutual fund houses. The NPS allows up to 50% equity

exposure and the charges are negligible compared to the terribly high costs of investing in a Ulip or a unit-linked pension plan from an insurance company. But NPS is not as liquid as ELSS funds and investments that get tax deduction cannot be withdrawn before retirement.

5 reason why insurance would not save tax

Five Reasons why Insurance would not Save Tax

1)No deduction: Under DTC, an insurance policy that offers a cover of less than 20 times

the annual premium won’t be eligible for tax deduction.

2)Tax on maturity: If the 20 times life cover condition is not met, even the income accruing

from the policy will be taxable.

3)Lower limit: The tax deduction limit for life insurance will be reduced from the present ` 1 lakh to ` 50,000 a year.

4)Tax on withdrawals: Partial withdrawals from an insurance plan before maturity will be taxable under DTC.

5)Tax on surrendering: The surrender value of a plan will also be taxable.

How to salary package make tax efficient

How to make your salary package tax-efficient

Make your salary package tax-efficient by planning your income tax well.For income tax planning, you can structure your pay package so that it includes various tax-free payments rather than getting it all as basic salary.

Some of the common payments are:

• House rent allowance (HRA)

• Transport allowance

• Reimbursement of medical expense, hotel bills, foreign travel of spouse, and books

• Car provided by company

• Food coupons

• Leave travel concession (LTC)

Your EPF (employee provident fund) contribution is at your discretion; you may adjust it

depending on your other investment needs. It is a good idea to raise your employer's contribution up to 12% of your salary, as it is exempt from tax.Though you get tax benefit on certain allowances mentioned above, all perquisites are taxable as normal salary. Some common perquisites which are taxable as normal salary are:

• Loan at an interest rate lower than SBI PLR

• Rent-free accommodation

claiming under section 80c

Claiming Under Section 80c

As a taxpayer, you are entitled to reduce your tax liability by making certain investments

during the year. Section 80C is specifically meant for claiming deductions in respect of payments/investments such as contribution to Provident Fund, ULIP, ELSS, life insurance

premium, and investments in NSC.   

The complete list of deductions is given below:  year

• Contribution to provident fund

• Life insurance premium for self, spouse or child

• ULIP of UTI

• ULIP of LIC Mutual Fund

• ELSS of MF/UTI

• Annuity Plan of LIC

• Notified Pension Fund

• 10/15 yr CTD account at Post Office

• Deposit Scheme of PSUs Engaged in housing finance

• Deferred annuity

• Approved superannuation fund

• National Savings Certificate (NSC)

• Instalment for purchase/construction of new residential property

• Tuition fee of children

• Investment in public company engaged in infrastructure

• Fixed deposit in bank for tenure of 5 or more years

• Bonds issued by NABARD

39Claim

Higher Education Loan is Deductitable

Interest on Higher Education Loan is Fully Deductitable

As the Government, under section 80E, has said that you can claim deduction if you have paid interest, out of your income chargeable to tax, on the loan taken for your higher education or your relative’s (spouse or children) higher education.Now the legal guardian is also allowed to claim deduction. Higher education involves full-time studies for a graduate or post-graduate

course in engineering, medicine, management; or for post-graduate course in applied sciences, or pure sciences, including mathematics and statistics. The vocational studies pursued after passing senior secondary is also included.

Which loans qualify for deduction? The loan should be taken for higher studies from any financial institution or approved charitable institution. Personal loans from individuals, relatives and friends, are not eligible for this deduction, as is the case with home loan. You can claim deduction for interest for up to eight years from the start of the assessment year when

you begin repaying your education loan. There is no limit on the amount of interest on which deduction is allowed for education loan. Payment should be made from taxable income only.

Start paying interest right from the first year to maximize income tax benefits. Banks charge lower rates of interest too from those paying interest during the study period.Parents should encourage children to take education loan and save their funds for retirement. This helps children save money compulsorily, when they have a job but no family. Otherwise, they might

spend all their income in the initial years and you will become dependent on them during retirement years.You can always support your children as a surety for the higher education loans need but funds should be borrowed keeping in view the rate of interest,repayment tenure, surplus income of new joiners and no limit tax benefit.Taking a car loan will not help a salaried person save tax . However if you have taken education loan,you can keep your tax liability low and your parents’heads high.As a parent, a better gift to your child is to fund his/her higher education, instead of a car!

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