Legal Methods To Evade TaxTax | May 10, 2013 at 12:00 am
Evading taxes is a crime, but avoiding and saving taxes is right of every law abiding citizen and there are many strategies structured to save your taxes and bring down your tax liabilities.
Some of the methods one can opt for saving taxes are-
1. Tax laws permit investors to adjust the cost of the asset to inflation during the holding period, and with inflation has been the cause of worry for most of us, the tax payer can take advantage of the indexation and reduce their tax bills, however not all investments are covered under this item and only certain capital assets, debt funds, gold ETFs are eligible for deduction.
2. If you gift money to your wife, and the same is invested in her name, the tax laws will club her income with yours and the advantage is that the clubbing takes place at the first level of income, and if the money is reinvested and earns income, it will be treated as your wife’s income and not yours and hence you may gift money to your wife then get her to invest in any of the tax free investment options.
3. Your parents can also help you to reduce your tax liability, if any or both of your parents do not have high income, and if you are in the highest 30% slab, you can invest in their name and earn a tax free income. Every adult is eligible for tax exemption to the tune of two lakhs every year.
4. You can double up your tax exemption by establishing a HUF- Hindu undivided family – as a separate entity and you are entitled to same benefits and exemptions like any other taxpaying individual,
5. You may seek help of your adult child when he turns 18 years of age, and is treated as a separate individual for tax purposes, and he enjoys the same exemptions and deductions like you and you may gift money to him and invest the same.
All said and done, it is the duty of law abiding citizens to pay their tax on time.