Tax planning is not a device to reduce tax burden. In fact, it helps savings by investments in government securities. Savings reduce extravagance, and correspondingly inflation. Tax savings are permitted only for investment made i:n government securities and bonds of priority sectors which ultimately help the nation. Therefore, the savings in tax help the Central and state governments to mobilizes funds by way of investments and as such the government earns much by way of other benefits, by sacrificing small amount of tax. The Supreme Court in one case observed that "Tax planning may be legitimate provided it is within the framework of Law". By tax planning, the government is equally benefited.

Savings and investments are interconnected. Before making investments the person has to consider various factors such as

• Liquidity-when he requires the amount to meet the educational expenses of children,for marriage, house construction or for a secure future after retirement.
• Security of the investment.
• The return and tax on income on such investments.

This varies from person to person. A person by investing in NSC saves on his tax. However, the interest on the investment is taxable. Again, if the investment is made in PPF, he is not liable to pay the income tax on interest. But the period of NSC is six years whereas in the case of PPF the period of repayment is 5 years. However, a portion can be claimed after 7years. Thus the person who makes the investment has to consider whether he requires the amount after 5 years or he can wait for a longer period.

To make investments there should be savings. A lower income person also wants to save, but his gross income and day-to-day expenses don't leave him anything to save. For example, if he has to save Rs 20 from tax by investmenting in NSC, he has to invest Rs 100. Sometimes considering his financial needs he will be prepared to pay the tax of Rs 20, so that Rs 80 is there for his other needs. Therefore, the capacity of savings is also very relevant. To increase savings one should make investments that give reasonable returns. Again this return becomes a saving if invested. This booklet talks' about the deductions available under various head such as salary and house property and also various modes of investments and tax deduction available from the said investments. The rebates, concessions and-liability of tax in this article are with reference to the assessment year 2001-2002 (financial year April 1, 2000 to March 31 2001). The amendments made by the Budget 2001 are also touched upon in brief.