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Tax Advantages



21 replies to this topic

#1
fasee

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    guys i am starting this thread for ordinary peple like me, to take advantge of the tax benefits or relaxations provided by government from time to time. but of which we either dont know, or are shy to ask.

    this might look a bit confuising or hard work, but once you are stream lined you would see the benefits, and in comming years, this help you save a few hundred ruppes, or a few thousand or a few hundred thousand with little effort.

    hope this thread helps out people in saving some money, which is there own in teh first place, but lost due to lack of knowdlge of the incoem tax rules

    Note:
    some of the info might get obsolete with time, as rules change, or my own stretigies gets refined or corrected. hence we can improve each others concepts, jazzakallah

    Edited by fasee, 08 September 2012 - 12:48 PM.

    It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.


    #2
    fasee

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    Withholding taxes.

    Withholding tax is deducted in many areas, which most people consider as final tax, whereas, it’s just a advance taxation, if not applicable, or additional, would be refunded, or at least netted off from your annual tax liability.

    Where to look for
    • Mobile Post paid bills
    • Fixed Telephone lines
    • Prepaid connections
    • Vphone cards
    • (All other utility bills have GST which cannot be claimed by end consumer (that’s us))
    • Brokerage transactions
    • Cash withdrawals from banks
    • Or payments received from parties for goods or services supplied.
    Capital Gains
    Mutual Funds deducted capital gains on funds redeemed before one year, you can add that gain to your return, and can adjust this from any capital losses you have made this year.

    So...that means, if you have made losses in stocks, at least the amount deducted at source should not have been, hence becomes excess taxation, hence refundable, as, this is not a fixed tax regime like w.h.t 10 % on other banking prodcuts.

    Where to look for
    Mutual funds industry, as cpaital gain is guranteed, ( in money marekt funds ), hence this profit / intrest whcih is in shape of gain can still futher be reduced.

    Zakat [section 61 ]

    If you have paid zakat to approved institutions (most well known institutions are approved), i.e. shaukat khanam, edhi, siut etc….this is directly deductible from your income, hence giving relief in tax in two ways
    • Reduction in tax
    • If zakat is bigger than the amount above your previous tax slab, it reduces the income to a lower slab, hence a lower slab rate, hence effecting total tax payable on total income of the year
    ( this thing stopped from this year 2012-2013 as now different slab rates have been introduced )

    Charity [ Section 61]

    Charity given to approved institutions as explained above, makes us eligible for a tax rebate as per rebate formula, given below

    Place formula & rules here

    For which, you have to have proper receipts of payment to these organizations

    Investment in Shares [section 62 ]
    You are eligible to avail tax benefits if you hold new shares ( that’s means shares bought in IPO ) as shares from stocks exchange are secondary market shares.
    Mutual funds utilize this to our advantage, when we invest in mutual funds ( all types ) they issue us fresh units that we can treat under this section..( Don’t know till how much more time the govt would let this benefit be availed. :)

    At the moment , you can invest in any mutual fund and get following benefits, for monies parked from 1-2 years at least
    • Tax free returns if money parked above 1 year
    • Tax benefits in annual returns, as per rules, if money parked for 2 years
    • Fund size has restrictions, that are explained below
    Place formula & rules here

    Contribution to Approved Pension Fund [section 63 ]
    This is another product with very low info and low market penetration, but a wonderful product to have indeed, specially for those who have surplus incomes, and those who have maxed out on their mutual fund limits and still want to put some more funds into mutual funds

    Place formula & rules here


    Loan taken [ section 64 ]
    If interest has been taken for buying or constructing a NEW house, that person is eligible for a tax rebate as per given formula.


    Place formula & rules here


    Medical Expense
    Till 2 years back, medical expenses done on own or family were eligible for a tax discount, but for which proper invoices and ntn number of doctors were required, easily available if you got treated in some major hospital, i.e. agha khan or south city or any other regular hospital

    At the moment this rebate has been discontinued, but pointed out, as you never know, rules change and facilities withdrawal are provided again. So keep it in mind to look for in coming years, if any.

    Edited by fasee, 08 September 2012 - 01:22 PM.

    It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.

    #3
    fasee

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    one mroe thing

    diversify your moneis something on these lines, percentages might varry, depedning on how agressive or defenisve you want to play

    1) Into liquid ( banks, TRDs, COIs, divident stocks, Mutul funds ) or non liquid stocks property, growth stocks etc
    1) short term, medium term long term holdings

    this diversification gives you multiple advantages, and help you withstand shocks in a much better shape

    sources of generating funds can be set in place liek this

    1) your regular income which is your salary / business / services / rentals etc etc...ideally your home expense ( food , education medication ) should be covered by your regualr income..hence no pressure on other sources, and you can do masti with a freee mind.
    2) your regualr income from predictable, stable 2nd srouce...TDRs, COIs, money marekt mutul funds, divident income....that gives you a stable 12-16 % returns with very very low risk to capital
    3)Capital Gains or trading incomes from stock markets...which when # 1 & # 2 are in place, gets a automatic boost, due to saftey nets in place.

    apart from the secuirty feature, # 1 & # 2 gives you setady source in income which you can regualrly ploug into stocks, every month, to accumulate shares at diffrne tprices, let you avergae out your buys...and never be out of cash for more than 20-25 days at max... :)

    this is apart from the regualr up n down in stocks you do, to gain profits.....hence, to summarise, having a 25-45 % weight in money market fund gives your stocks trading multple level of boosts in

    1) providing a saftey cushion in worst case scenario
    2)you know you have extra funds, and wud not be on the road if kse exploded
    3) you can take much mroe agressive stance in stocks, once you have your back covered by mutul funds
    4)a monthly income from funds, you can trasnfer to kse, so you wud never be out of cash for more than 25-30 days at max.
    5) regualar cash gives you sane buying, with better rates due to avergaing out effect
    6) availability of liquid funds in case you need for any emergency need / good bulk buying for a chance entry in stocks.
    7)tax ebnefits of mutul funds give you an excellent return..10-12 % return+ 15-20% tax arbirtage for held to 2 years measn 7.5 to 10 % p.a....acucmulated return on mutul fund for a salruied class is 17.5 to 22% combined..which is a decent return.....plus the above mentioned benefits are icing on teh cake

    Edited by fasee, 08 September 2012 - 03:19 PM.

    It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.

    #4
    fasee

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    the above posts are kind of template, i wud keep coming back and updating and revising them, as being such a slow guy, i have given a framework, and will place mroe n more data gradualy...to be com,plete in next few days....thank you for the patience
    It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.

    #5
    Mansoor

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    View Postfasee, on 08 September 2012 - 12:46 PM, said:

    guys i am starting this thread for ordinary peple like me, to take advantge of the tax benefits or relaxations provided by government from time to time. but of which we either dont know, or are shy to ask.

    this might look a bit confuising or hard work, but once you are stream lined you would see the benefits, and in comming years, this help you save a few hundred ruppes, or a few thousand or a few hundred thousand with little effort.

    hope this thread helps out people in saving some money, which is there own in teh first place, but lost due to lack of knowdlge of the incoem tax rules

    Note:
    some of the info might get obsolete with time, as rules change, or my own stretigies gets refined or corrected. hence we can improve each others concepts, jazzakallah

    that's a very nice step fasee bahi. As this is ur field so u can provide lot of details about tax issues and can help many.... so this thread wud really be of lot of help.

    Jazak ALLAH for all the ur efforts.
    **********


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    #6
    Mansoor

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    View Postfasee, on 08 September 2012 - 03:17 PM, said:

    the above posts are kind of template, i wud keep coming back and updating and revising them, as being such a slow guy, i have given a framework, and will place mroe n more data gradualy...to be com,plete in next few days....thank you for the patience

    No worries sir jee..... just keep updating.... we r here to read and try to understand... n will surely question where needed. :)
    **********


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