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  Tax Planning

 
home > Tax Planning > Nuts & Bolts of IT > Investments & Taxes
logo   TAX IMPLICATIONS OF VARIOUS INVESTMENT AVENUES
   
  Insurance
 
  • Premiums paid towards an insurance plan will be eligible for a deduction under section 80C.
  • Any amount received under an insurance plan will be exempt from tax under section 10(10D).
  Keyman insurance
 
  • Premium paid towards a keyman policy will be admissible business expenditure.
  • Amount received on death will be exempt from tax under section 10(10D)
  • Amount received on maturity will be taxable.
  Mutual funds
 
  • In the equity oriented mutual funds, the dividends will be exempt from tax.
  • In the case of ELSS schemes, the contribution is an eligible investment avenue under section 80C and the dividends will be exempt from tax.
  Derivatives
 
  • Derivatives are not treated as a speculative transaction. Hence,losses on derivative transactions can be set off against other capital losses.
  Equities
 
  • Buy backs – The amount at which the company buys back the shares is the sale consideration and the difference between the sale amount and the cost of acquisition will be taxed as a capital gain in the hands of the shareholder.
  • Bonus – the cost of acquisition of bonus shares is nil. Hence, the sale value will be fully taken into consideration for computing capital gains.
  • Rights – In case the right shares are sold in the market, then the amount will be taxable.
  • ESOPS – In case the employee exercises his option to purchase the shares and sells the same in the outside market, the amount of gain will be taxable.
  Bonds and debt instruments
 
  • RBI bonds – RBI bonds no longer boast of any tax sops.
  • Infrastructure bonds – Infrastructure bonds issued by ICICI and IDBI etc are eligible investment aenues under section 80C of the income tax act.
  • POSS – Contribution towards PPF is eligible under section 80C. Interest earned is exempt under section 10(10D).
  • NSC – Contribution towards NSC is eligible under section 80C. Interest earned is fully taxable.
  • POMIS – There are no tax benefits whatsoever in the case of POMIS.
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