Tax Panning for Different Stages of Life
Tax Planning for Different Stages of Life
Some people have a wrong notion that tax planning is useful only once you are well settled in a business or profession. That is not true. In fact, the best time to start tax planning is right from the day you start having any income in your name. And, it should be continued in right earnest, year after year. Here is how ...
Tax Planning upon Becoming a Major
Your first lesson in tax planning should start when you complete 18 years of age. Obviously, at 18, you won’t have too much income in your name. However, the first step when you are 18 is to start documenting any big or small amounts you receive as gifts. The small cash presents you receive on various ceremonial occasions should be put into the bank in the initial years of your life after becoming a major. It is time now for you to adopt the first lesson in tax planning, namely separate income tax files for each individual so that one’s income is not added with that of other family members. Once you turn 18, you should file a separate income tax return and you are also eligible to enjoy the benefit of various exemptions, deductions and tax rebates available to all tax payers.
Tax Planning Once You Start Earning
As soon as you start earning, either by doing a job or through your business or profession, it is time for you to systematically maintain your withdrawals, banks deposits, etc. Typically, one is single when you start earning, you are single. This is therefore the right time for you to save as much as you can because you have fewer financial commitments. A better course would be for you to invest your savings in a public provident fund (PPF) account so that the money is saved and blocked for a minimum period of 15 years. From the point of view of tax planning, lavish spending would be a waste. Also, you can now go in for some insurance policy with a long period of maturity.
Tax Planning When You Get Married
Tax planning for your married life should start a few months before the actual date of your marriage. This is because you should not make any gift to your spouse after marriage otherwise the income arising from the gifted amount will be clubbed or added with your income. The best tax planning, therefore, would be to make a gift to your prospective spouse just a few months before marriage when she is not legally your wife but simply your friend or fiancee. After marriage, you need to plan the income tax file of even your spouse.
If your spouse is not working, then it is better that you do not make drawings for household expenses, etc. from the income arising to your spouse. The simple reason for doing so is that her income and funds are lower in comparison with yours. It, therefore, makes a sense to withdraw money for household expenses and for holidays from funds of the person having a higher income in his or her name. It is better from the point of tax planning to invest and spend wisely the funds belonging to the spouse whose income and wealth is small.
However, if yours is a case of DINKS (i.e., Double Income No Kids), then you can think of joint systematic withdrawal plans for expenses.
After marriage, both the husband and wife should take full advantage of income tax rebate and deductions. It is also time to have a look at long-term insurance and pension plans. While investments in insurance and pension plans may not be found immediately beneficial soon after marriage, but in years to come these will have a very good effect on your personal finances. The focus should be for twenty-year tax planning.
In case you are contemplating to have a house of your own, the best time is to start saving right at this stage. Later, your own money as also loans will help in acquiring a residential house property. The biggest advantage of putting your money in residential house property is the tax haven on the one hand while on the other hand you get a secure place of your own to live in. It is suggested that you should go in for a self-financing scheme of residential house property with long time frame in mind so that payment of installments will result in tax saving for you.
Tax Planning after a Decade of Your Marriage
Generally speaking, after a decade of your marriage your family would be complete. You should now look at tax planning in a more serious manner. It is time now for you to plan for some investments and funds in the names of your minor children. Even if you have some constraint as regards the funds available at your disposal, it is worthwhile now to take some insurance policy in the name of your minor children for their education and marriage purposes. This should be a long-term policy with a small amount of premium payment year after year.
Tax Planning after the Marriage of Your Children
Once your children are grown up and settled in life, most of your responsibility towards them is over. It is now time for you to relax. Now you should plan your investment strategies in such a manner that the income in your family group is distributed from the point of view of tax planning, not merely in your name and that of your spouse but in the names of your son, your daughter-in-law and your grand children. You should also now start focusing on the investment decisions which will have a long-term repercussion relating to your succession. Thus, it is recommended to you that you should prepare your Will and adopt tax planning relating to the wills and achieve ultimate tax saving for family members who are going to be a part of your succession plan.
Tax Planning for Senior Citizens
Your tax planning should now be such that you have no hassles and tensions in these golden years. Your aim should be to have an easy flow of money from your investments. The thrust should be on safety of your capital as against higher returns. Your focus should be only on 100% safe and secured investments. Try to have a joint bank account and joint investments which will help smooth succession in the years to follow. Your tax planning should now be in such a manner that you are required to spend less time managing your affairs and have more time available for your personal pursuits.
Conclusion
Intelligent tax planning calls for changes in approach every few years. It is, therefore, recommended that you must review your investment and tax planning perspective at least every decade and reorient it depending on the facts and circumstances of the situation.
Some people have a wrong notion that tax planning is useful only once you are well settled in a business or profession. That is not true. In fact, the best time to start tax planning is right from the day you start having any income in your name. And, it should be continued in right earnest, year after year. Here is how ...
Tax Planning upon Becoming a Major
Your first lesson in tax planning should start when you complete 18 years of age. Obviously, at 18, you won’t have too much income in your name. However, the first step when you are 18 is to start documenting any big or small amounts you receive as gifts. The small cash presents you receive on various ceremonial occasions should be put into the bank in the initial years of your life after becoming a major. It is time now for you to adopt the first lesson in tax planning, namely separate income tax files for each individual so that one’s income is not added with that of other family members. Once you turn 18, you should file a separate income tax return and you are also eligible to enjoy the benefit of various exemptions, deductions and tax rebates available to all tax payers.
Tax Planning Once You Start Earning
As soon as you start earning, either by doing a job or through your business or profession, it is time for you to systematically maintain your withdrawals, banks deposits, etc. Typically, one is single when you start earning, you are single. This is therefore the right time for you to save as much as you can because you have fewer financial commitments. A better course would be for you to invest your savings in a public provident fund (PPF) account so that the money is saved and blocked for a minimum period of 15 years. From the point of view of tax planning, lavish spending would be a waste. Also, you can now go in for some insurance policy with a long period of maturity.
Tax Planning When You Get Married
Tax planning for your married life should start a few months before the actual date of your marriage. This is because you should not make any gift to your spouse after marriage otherwise the income arising from the gifted amount will be clubbed or added with your income. The best tax planning, therefore, would be to make a gift to your prospective spouse just a few months before marriage when she is not legally your wife but simply your friend or fiancee. After marriage, you need to plan the income tax file of even your spouse.
If your spouse is not working, then it is better that you do not make drawings for household expenses, etc. from the income arising to your spouse. The simple reason for doing so is that her income and funds are lower in comparison with yours. It, therefore, makes a sense to withdraw money for household expenses and for holidays from funds of the person having a higher income in his or her name. It is better from the point of tax planning to invest and spend wisely the funds belonging to the spouse whose income and wealth is small.
However, if yours is a case of DINKS (i.e., Double Income No Kids), then you can think of joint systematic withdrawal plans for expenses.
After marriage, both the husband and wife should take full advantage of income tax rebate and deductions. It is also time to have a look at long-term insurance and pension plans. While investments in insurance and pension plans may not be found immediately beneficial soon after marriage, but in years to come these will have a very good effect on your personal finances. The focus should be for twenty-year tax planning.
In case you are contemplating to have a house of your own, the best time is to start saving right at this stage. Later, your own money as also loans will help in acquiring a residential house property. The biggest advantage of putting your money in residential house property is the tax haven on the one hand while on the other hand you get a secure place of your own to live in. It is suggested that you should go in for a self-financing scheme of residential house property with long time frame in mind so that payment of installments will result in tax saving for you.
Tax Planning after a Decade of Your Marriage
Generally speaking, after a decade of your marriage your family would be complete. You should now look at tax planning in a more serious manner. It is time now for you to plan for some investments and funds in the names of your minor children. Even if you have some constraint as regards the funds available at your disposal, it is worthwhile now to take some insurance policy in the name of your minor children for their education and marriage purposes. This should be a long-term policy with a small amount of premium payment year after year.
Tax Planning after the Marriage of Your Children
Once your children are grown up and settled in life, most of your responsibility towards them is over. It is now time for you to relax. Now you should plan your investment strategies in such a manner that the income in your family group is distributed from the point of view of tax planning, not merely in your name and that of your spouse but in the names of your son, your daughter-in-law and your grand children. You should also now start focusing on the investment decisions which will have a long-term repercussion relating to your succession. Thus, it is recommended to you that you should prepare your Will and adopt tax planning relating to the wills and achieve ultimate tax saving for family members who are going to be a part of your succession plan.
Tax Planning for Senior Citizens
Your tax planning should now be such that you have no hassles and tensions in these golden years. Your aim should be to have an easy flow of money from your investments. The thrust should be on safety of your capital as against higher returns. Your focus should be only on 100% safe and secured investments. Try to have a joint bank account and joint investments which will help smooth succession in the years to follow. Your tax planning should now be in such a manner that you are required to spend less time managing your affairs and have more time available for your personal pursuits.
Conclusion
Intelligent tax planning calls for changes in approach every few years. It is, therefore, recommended that you must review your investment and tax planning perspective at least every decade and reorient it depending on the facts and circumstances of the situation.
posted by N.M. Finserv at
10:04 PM
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