Page 64 - DCOM508_CORPORATE_TAX_PLANNING

Unit 3: Corporate Tax Planning

4. Reorganise the salary: Reorganising the salary and incorporating certain apparatus can Notes
help in the long run in minimising the tax liability. In order to assert tax benefi ts salary
reform is a more competent measure. The following can be included in an individual’s
salary structure:
(a) Food coupons can release up to ` 60,000 per year from tax.
(b) Medical expenses which are compensated by the employer spare up to ` 15,000 per
year.
(c) House Rent Allowance (HRA) should be incorporated in the salaries of individuals
who stay in rented houses
(d) Transport allowance discharge up to ` 800 per month.

5. Go for a combined home loan: The primary reimbursement on a home loan is entitled for
a reduction of up to ` 100,000 pa and the interest rewarded are entitled for a reduction of
up to ` 150,000 pa. When a home loan is for a considerable amount then the interest and
chief reimbursement surpass the allotted limit. A salaried individual can go for a combined
joint home loan with his parent, spouse or sibling, to guarantee the best utilisation of tax
advantages.
In this way both the owners can assert tax reductions in the percentage of their stake
holding in the loan.

3.1.4 Different Types of Tax Planning Strategies

The goal of all tax planning strategies is to minimise an individual’s or business’ total tax liability
for the year while also meeting personal or business financial goals. In order to achieve these

goals, comprehensive research and exacting record keeping are essential elements of all types
of successful planning strategies. An individual may not need to use every type of tax strategy,
but having a broad knowledge of tax issues will assure that he minimises his tax liability and
prepares an accurate return. Whether it is taking advantage of current education-related tax
credits or understanding the intricacies of depreciation, each strategy relies on thorough research
and meticulous record keeping.

Investigating all aspects of income taxes — concentrating on the areas that pertain to the

individual’s financial situation — is the most important tax planning strategy. Many credits,
deductions and limits on retirement or health savings accounts contributions change from year to
year. Taxpayers often remain unaware of these changes and miss opportunities that they would
qualify for. The most accurate and updated information can be accessed through the federal,
state or local tax entity.

Whether using a tax professional, accountant, or self-preparing the return, implementing tax
planning strategies and maintaining records throughout the year provides the individual or
business with the necessary tools to minimise tax liability. This second important tax planning
strategy allows the individual or business to accurately track their progress on their goals through
precise record keeping. It also assures nothing is missed when it is time to prepare the tax return.
Spreadsheets and fi nancial software are tax planning tools that help organise information. The
software expense may be tax deductible.

Although the fi rst two tax planning strategies apply to everyone, others are applicable depending
on the individual’s financial situation. Making sure that pre-tax contributions to retirement and

health savings accounts are maximised and done within the allowed time span may help lower
any tax liability. Homeowners should use strategies that take advantage of any credits available
for expenses related to their residences.

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