It is said that money can be made only by money. You can increase your money only by earning money and investing it. If you save these money and just keep it in a savings account, then you will not get much benefit. At the same time, when you have to pay your hard earned money as tax, you will feel sad. But you can save your money by making a good tax plan. Rich people also pay the least tax due to tax planning. You can get tax rebate by investing in various schemes. You can get tax exemption under various sections of Income Tax Act. When you are paying interest on home loan, you can avail tax under section 24. So through this article we are going to tell you how rich people pay less tax by doing good tax planning.
With the help of ELSS, rich people save tax
Equity Linked Saving Scheme (ELSS) is a type of mutual fund which helps in saving tax. You can save up to Rs 1.5 lakh in a year on investing in ELSS under Section 80C of the Income Tax Act. If you fall in the higher tax bracket (30% tax bracket), ELSS will be very helpful for you. It has a lock-in period of just 3 years. ELSS invests most of your money in shares. This means that if you stay invested for a longer period, you are more likely to get higher returns. However, remember that investments in mutual funds are subject to risk. Please read the offer documents carefully before investing.
Suppose you earn 11 lakh rupees in a year and fall in the 30% tax bracket. You can save up to 46 thousand 800 rupees from your tax. But how? If you invest 1 lakh 50 thousand rupees every year in ELSS, then you can save 30% tax on 1 lakh 50 thousand rupees, which changes to 45 thousand rupees per year. After deducting 4%, you can save tax of Rs 46 thousand 800 per year. This is one of the ways rich people use it to save tax.
Wealthy people can do something good for society by paying for charity through NGOs. You can avail 100% tax deduction by donating to a particular type of charity. There is a 50% tax deduction benefit when donating to some other charity institutions. Rich people donate money to charity institutions and save tax with the aim of doing something for society.
Take help of professionals
The rich are not afraid to seek the help of chartered accountants, tax advisors and financial advisors to save tax. At the same time, the common people wonder why the tax adviser should be given money and they pay more tax like this. Financial advisor helps in saving tax as well as increasing your money.
In 1985, the inheritance tax (inheritance tax) in India was abolished. Yet the rich people fear that it can be re-implemented at any time in India. They want to protect their property for their children. Inheritance tax is a tax that is levied on assets transferred to a legal heir or heir. When any person inherits a property, he has to pay tax. In this type of situation, rich people save tax through trust. After forming a trust all the assets of the person can be transferred to the trust. The trusts are administered by the trustees. If inheritance tax was once again introduced in India, people can avoid it through irrevocable trusts. Assets that are transferred to a trust cannot be transferred back. Many HNIs, wealthy corporate businessmen and even film stars or cricketers use trusts to transfer assets to their children.
Also, rich people use insurance schemes and other investment media to save tax. If you buy a health insurance plan for yourself or parents, the tax exemption can be availed under Section 80D of the Income Tax Act on the premium paid for the plan. Therefore, make a good tax plan and save the maximum amount of your hard work.