04 KALEIDOSCOPE ERGO Monday, December 15, 2008

MINI QUIZ

Tax planning demystified

Winner gets a free Personal Finance Health
Check up from Finerva.
1. What is the rate of Income Tax for a per-
son with salary between 3, 00,001 and
5,00,000?
A. 15%
B. 21%

– PART 1 A five-part series

C. 20%
D. 33.33%
2. Which is the only type of mutual fund
given below which will gives you tax benefits?
on Income Tax
A. Mid-cap funds
B. Income Funds
C. Monthly income planss
D. Equity Linked Savings Schemes
Send your answers to finergo@goergo.in or SMS
your answers to 92813 98889. For example if you
choose A as the answer to question 1 and B as
the answer to question 2 type it as 1A2B and
send it.

Word power
Find out as many as possible words which
can be made using the letters of the words
given below
Words should be at least 4 letters long.
Proper nouns do not count. Duplicates
don’t count.
Money, Income, Wealth, Invest
Answers A.1 meno 2 money 3 mony 4 nome
5 omen
B.1 cine 2 cion 3 coin 4 come 5 cone 6 coni 7
emic 8 icon 9 income 10 meno 11 mice 12
mien 13 mince 14 mine 15 monie 16 nice 17
nome 18 omen 19 once
C.1 eath 2 haet 3 hale 4 halt 5 hate 6 heal 7
heat 8 late 9 lath 10 lathe 11 tael 12 tale 13 teal
14 tela 15 thae 16 thaw 17 thew 18 twae 19 wale
20 weal 21 wealth 22 welt 23 whale 24 what 25
wheal 26 wheat 27 whet
D.1 inset 2 invest 3 neist 4 nest 5 nets 6 nevi
7 nite 8 nites 9 nits 10 sent 11 senti 12 sine 13
site 14 snit 15 stein 16 tens 17 ties 18 tine 19
tines 20 tins 21 vein 22 veins 23 vent 24 vents
25 vest 26 vets 27 vies 28 vine 29 vines 30 vise

T
his five-part series will demysti-
fy everything you wanted to
Gold Rush know about Income Tax.
Tax planning has been a
year-end issue filled with anxieties. A
time when auditors, tax consultants,
insurance agents, your office ac-
countant and so many others
pounce on you for investments. And
at the same time the government is
eager to take its share of your salary.
The problem is that you end up
with a plan which is not synchro-
nous with your long-term financial
plans. People borrow money at 18%
to invest in bonds giving 8% returns
to save tax.
The question is, do I invest only
쒀 A saleswoman displays a diamond ring
for the sake of saving tax? The an-
worth Rs.1.5 crores and bangles worth
swer is a big no. In fact, there are
Rs.50 lakhs, at the Vijayawada Gold and
situations when it is advisable to pay
Diamond Jewellery Fair-2008 that began
your taxes rather than getting into an
on Sunday. PHOTO:CH.VIJAYA BHASKAR.
investment which does not contrib-
ute to achieving your financial goals.
Every decision has to contribute to-
wards your life goals.
Tax benefits
The basic concept of giving relief
is that, the investments expenses in
certain instruments can be used to
build the nation’s resources and in-
frastructure. By building a house you
help industries like cement, steel,
banks and brick making; and pro-
vides employment to many skilled
and unskilled workers. So you are in-
volved in the development of the na-
tion. Thus reducing the
government’s burden and to that ex-
tent you are given relief from paying
taxes for spending your money.
By paying insurance premiums
you are sharing the government’s
burden to give financial security to
its citizens. You are rewarded with
tax reliefs.
Your investments in ELSS with a 3
year lock-in period helps build the
capital markets, over a period of
time. This in turn brings more in-
vestment and foreign exchange into
the country, thus developing the
economy as a whole.
Your expenses for the education of
your children, reduces the govern-
ment’s burden to provide them with
education. You get a tax relief. This is
the reason only specific instruments
give you tax relief.
The bottom-line: The choice of the
instrument and the quantum invest-
ed/spent should depend on your fi-
nancial goals and not just based on
your tax-liability. The next articles
will help you take the decisions relat-
ed to your income tax. ■
V. Ramachandran, Branch Manager,
ram@finerva.com