When making any investment it is important to work out its tax implication because what is important is the net return from an investment, after taking into account applicable income tax and wealth tax. Without considering the tax angle, investments may sometimes result in negative returns. In particular, any income-related investment must finally be evaluated based on its returns after tax.

Wherever possible, investment strategies should be so designed as to achieve the lowest - or nil - tax on one's investment. This is possible by adopting legitimate tax planning in respect of investments. Those looking for nil rate of tax on the investments should particularly make use of the provisions of Section 10 of the Income Tax Act, 1961. Taking advantage of PPF, tax-free bonds, mutual funds, etc. would also help in planning tax-free investments. However, the tax-free bonds of RBI are not available presently but watch for details of new tax-free bonds, which will be issued from time to time.

Then, too, taking advantage of investments covered under the provisions contained in Sections 80C and 80CCC should result in lower taxes for most taxpayers. These are covered in detail at appropriate places in the book.

Secondly, it is usually beneficial to consider one's overall family investments, rather than looking piecemeal at investment for a single individual in the family. This aspect is important so that the income derived from various investments can be spread among the various family members, and thus attract lower income tax.

On the other hand, it is a fact that there has been erosion in the family values and traditions and family investment strategies should now keep this reality in view, especially when planning investments for retirement. Likewise, investments in the names of different family members should also be made in such a manner that the head of the family does not have to face any problem at any future point of time in case he wants to reshuffle investments in the names of different members of the family. Personal and family investments should also keep in view aspects relating to inheritance at a later stage. Accordingly, you may go in for joint purchase of properties, maintaining joint bank accounts and nominations in various investments.

Safety of investments

"All eggs should not be kept in one basket" is very applicable in the case of personal investments. Howsoever lucrative the investment proposals may be it should not be allotted an excessively large portion of your savings. It is recommended that entire savings available for investment should be divided at least into four to five portions so that the investment is spread over different areas.

Investment strategies should also focus on safety and security of the investment. Hence, lucrative-looking investments but which carry high risks should be totally avoided. Investments offering medium returns but which ensure topmost security and safety of invested funds should be preferred.

Senior citizen investors

For Senior Citizens a new Senior Citizens Savings Scheme was introduced w.e.f. 1-8-2004 with investment cap of Rs 15 lakh and interest rate of 9% p.a. This scheme is open to senior citizens above the age of 60 years.

Investments in the name of Senior Citizens can be more freely done even in non-exempted assets including Senior Citizens Savings Scheme specially because the Senior Citizens enjoy an exclusive Income-tax exemption limit of Rs 2,25,000 for the financial year 2008-2009, i.e., A.Y. 2009-2010.

Women investors

Investments in the name of women tax payers should be preferred strategy of investment planning in view of the fact that women tax payers below the age of 65 years enjoy an exclusive income-tax exemption limit of Rs. 1,80,000 for the financial year 2008-2009 relevant to the A.Y. 2009-2010, women tax payers below the age of 65 enjoy a special tax rebate to the tune of Rs. 5,000 per annum.

Life insurance

Taking advantage of life insurance policies should also figure as an important investment strategy. Investments made in life insurance policies carry three-fold benefits, namely, investment, reduction of taxes, and security of the family. Life insurance investment should be made in the name of different family members from an early age to avail of lower premium.

Investments in assets, which don't produce an income

Investments in jewellery, furniture, showpieces, antiques and consumer durables, i.e. investments in non-income producing assets, is best made in the names of those family members who are ultimately going to use the assets.

Investing for children

For minor children, and for daughters in particular, separate investment strategies should be prepared so that money is readily available in the future for expenses on their education and marriage. It is, therefore, useful to first prepare a cash flow chart listing when the funds are likely to be required. Such a chart will help an investor frame investment strategies in a manner that the refund in respect of investment made today is available in future point of time when the money is likely to be required, whether for buying a house, or the education or marriage of the children, and so on. By proper tax planning separate tax exemption on the income of the children can be achieved.