High net-worth individuals (HNWIs) face unique tax planning challenges that require specialized strategies to minimize their tax liability while maximizing their wealth. In this blog post, we’ll explore the top tax planning strategies for HNWIs a part from tax-saving instruments such as investments in 80C, 80D, 80E, NPS, etc. that can help them achieve their financial goals.

1. Invest in tax-efficient vehicles: One of the most effective ways for HNWIs to reduce their tax burden is by investing in tax-efficient vehicles. This can include municipal bonds, exchange-traded funds (ETFs), index funds, and other investment options that generate minimal taxable income. By allocating a portion of their portfolio to tax-efficient investments, HNWIs can reduce their overall tax liability.
2. Charitable giving: Charitable giving can be an effective tax planning strategy for HNWIs. By donating to qualified charitable organizations, HNWIs can claim a tax deduction on their income tax return. Donating appreciated assets, such as stocks or real estate, can also provide additional tax benefits by avoiding capital gains taxes.
3. Estate planning: HNWIs should consider estate planning strategies to minimize their estate tax liability. This can include creating a trust, gifting assets to heirs, and utilizing the annual gift tax exclusion. HNWIs can also take advantage of the lifetime estate tax exemption, which allows them to transfer a certain amount of assets tax-free.
4. Tax-loss harvesting: Tax-loss harvesting involves selling investments that have lost value in order to offset capital gains and reduce taxable income. This strategy can be particularly useful for HNWIs who have significant capital gains in their investment portfolio.
5. Timing of income and deductions: HNWIs can also consider timing their income and deductions to minimize their tax liability. This can involve deferring income to a future year, accelerating deductions into the current year, or bunching deductions to take advantage of itemized deductions.

The taxation of virtual or digital assets, such as cryptocurrencies, varies by jurisdiction. In general, virtual assets that are classified as property, such as Bitcoin, are subject to capital gains tax when they are sold or exchanged. This means that if an individual purchases a virtual asset at a lower price and then sells it at a higher price, the difference in value is subject to capital gains tax.

Overview:

The Public Provident Fund (PPF) is a long-term savings instrument established by the Central Government. It offers tax benefits on contributions as well as withdrawals after the lock-in period. This scheme came into force on July 1, 1968, and is backed by the government with the objective of providing old-age income security to the self-employed and those working in the unorganized sector. Though the scheme is voluntary, assured returns and income-tax benefits have fuelled its popularity. The primary objective of saving in the PPF account is to avail tax deductions on deposits, guaranteed returns on investment, and tax-free withdrawal on maturity. Savings in this product are completely risk-free because of government backing.

Key Features of a PPF Account:

• Capital Protection & Inflation Protection

The capital in a PPF account is completely protected as the scheme is backed by the Government of India, making it fully risk-free with guaranteed returns. The PPF account is however not inflation protected, which means whenever inflation is above the latest guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is below the guaranteed rate, it does manage a positive real rate of return. For Example; If the Inflation rate is 7% and the PPF Interest rate is also 7%, then our Investment earns no real returns.

• Interest Rate

Interest rates are aligned with G-sec rates of similar maturity, with a spread of 0.25 percent. The government has decided to review the PPF rates quarterly. Interest on the PPF balance is calculated every month and the amount is credited to the PPF account at the end of every financial year. Each month, the interest amount is calculated on the lowest PPF balance in the account after the 5th of every month to the last day of the month. Hence, PPF investors are advised to make contributions to their PPF account before the 5th of each month. For the fourth quarter of FY 2020-21, the rate has been set at 7.1 percent compounded annually.

• Liquidity (Loan against investment)

The PPF is liquid, despite the 15-year lock-in stipulated with this account. Liquidity is offered in the form of loans against the PPF. However, the loan will only be granted if it is taken at any time from the beginning of 3rd year till the end of the 6th year from the date of activation of the account. The maximum loan amount is limited to 25% of the PPF balance at the end of the 2nd year or the year preceding the year in which the loan is being applied. You will have to repay the loan in 36 months.

• Investment tenure

A PPF account has a lock-in period of 15 years on investment, before which funds cannot be withdrawn completely. This tenure can be extended by 5 years at the end of the actual lock-in period. Premature withdrawals are allowed but only in case of emergencies subject to the condition that “after the sixth year, you can withdraw up to 50% of the balance at the end of the fourth year, or the immediately preceding year, whichever is lower”.

• Minimum and maximum investment

You must contribute at least Rs 500 and at most Rs 1.5 lakh in your PPF account in a year. The minimum investment of Rs 500 has to be maintained even for accounts extended beyond 15 years. If you don’t put in a minimum of Rs 500 a year, the account becomes dormant and Rs 50 penalty will be charged for reactivating a dormant account. If you put in more than Rs 1.5 lakh in a year, the excess amount, even if credited by mistake, will not earn any interest. The maximum limit of Rs 1.5 lakh per year includes the contribution in PPF accounts in the names of minor children.

• Tax Implications

The scheme has exempt-exempt-exempt (EEE) status, where the deposits, the interest earned as well as the maturity amount are tax-free. The sum invested in the PPF account is eligible for tax deduction under Section 80C subject to a maximum of Rs 1.5 lakh in a financial year. On maturity, the entire amount including the interest is tax-free.

• Additional tax benefits of PPF

Open a PPF account in the name of your spouse or child to gain additional tax benefits. As per tax laws, if money gifted to a spouse is invested, income from the investment is clubbed with that of the giver. Since PPF income is tax-free, it does not push up the tax liability of the giver. So one can invest up to Rs 1.5 lakh a year in this tax-free haven.



Deductions under chapter 6 of the Income Tax Act in India refer to the various deductions that taxpayers can claim from their taxable income. These deductions are available under various sections of the Income Tax Act and are meant to encourage certain types of investments and expenditures that are considered to be beneficial for the economy or society. Here are some of the common key deductions available under chapter 6 of the Income Tax Act:

1. Section 80C: This section provides for a deduction of up to INR 1.5 Lakhs for investments and expenditures such as Public Provident Fund (PPF), National Savings Certificate (NSC), Life Insurance Premium, Equity-linked savings scheme (ELSS), Sukanya Samriddhi Scheme, etc.
2. Section 80CCC: This section provides for a deduction of contributions made to pension funds.
3. Section 80CCD: This section provides for a deduction for contributions made to the National Pension Scheme. (NPS)
4. Section 80D: This section provides for a deduction of up to INR 25,000 for health insurance premium payments made for self, spouse, and dependent children and INR 25,000 for health insurance premium payments made for parents.
5. Section 80DD: This section provides for a deduction of expenditure incurred for the maintenance of a disabled dependent.
6. Section 80DDB: This section provides for a deduction for medical treatment of specified diseases for self, spouse, children, and dependent parents.
7. Section 80E: This section provides for a deduction of interest paid on education loans for higher education.
8. Section 80G: This section provides for a deduction of donations made to specified charitable organizations and trusts.
9. Section 80GG: This section provides for a deduction of rental expenses paid by an individual who does not receive a house rent allowance (HRA) from the employer.
10. Section 80GGC: This section provides for a deduction of donations made to political parties.
11. Section 80TTA: This section provides for a deduction of up to INR 10,000 for interest earned on the savings account.
12. Section 80U: This section provides for a deduction of expenditure incurred for the maintenance of a disabled person.

It’s worth noting that the above-mentioned deductions are subject to certain conditions and restrictions, and the specific deductions and the amount of deductions available may vary depending on the specific section and the taxpayer’s personal circumstances. The deductions under chapter 6 of the Income Tax Act are meant to provide relief to taxpayers and to encourage certain types of investments and expenditures that are deemed to be beneficial for the economy or society.

Sukanya Samriddhi Scheme is a government-backed savings scheme in India that is specifically targeted towards the girl child. The scheme was launched by the Indian government in 2015 as part of the “Beti Bachao, Beti Padhao” campaign, which aims to address the issue of the declining child sex ratio in the country. The scheme is aimed at providing a secure future for the girl child and encouraging parents to invest in their daughter’s education and marriage expenses.

The scheme is open to any individual who has a girl child aged below 10 years. The account can be opened in any post office or authorized banks across India. The minimum deposit required to open the account is INR 1000 and the maximum deposit is INR 1.5 Lakhs per year. The account can be opened in the name of the girl child, and it will remain operational for 21 years from the date of opening. The account can be transferred from one bank or post office to another.

The interest rate for the scheme is determined by the government and is subject to change from time to time. The interest is compounded annually. The deposit made in the account is eligible for tax benefit under Section 80C of the Income Tax Act, 1961. The maturity proceeds of the scheme are also tax-free.

The scheme also offers a partial withdrawal facility after the completion of 5 years from the date of opening of the account. The withdrawal can be made only for the girl child’s higher education or marriage.

Sukanya Samriddhi Scheme is a long-term investment option that can provide a secure future for the girl child. It is a great way for parents to start saving for their daughter’s education and marriage expenses at an early age. The scheme also has a number of tax benefits, which makes it an attractive investment option. It is also a good option for those who are looking for a low-risk, fixed-return investment.

However, it is important to note that the scheme is only for the girl child and the account can only be opened before the girl child turns 10 years old. The scheme also has a lock-in period of 21 years and there are certain restrictions on withdrawals. It is also important to keep in mind that the interest rate for the scheme is determined by the government and is subject to change from time to time.

Overall, Sukanya Samriddhi Scheme can be a great investment option for parents who want to save for their daughter’s education and marriage expenses. The scheme offers a number of benefits and can provide a secure future for the girl child. It is important to understand the terms and conditions of the scheme and the restrictions on withdrawals before investing in the scheme. Consulting with financial experts can help understand the scheme better and make an informed decision.