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APPRECIATING THE TAX-WORTH OF AN INVESTMENT

A common mistake an ordinary investor makes in the choice of his investment is in jumping for a higher rate of interest, without taking into consideration the effective after tax return. Similarly, it is not uncommon to see an investor in a high tax slab, who is unable to appreciate the worth of a tax-free investment, the break-even rate of interest or the pre-tax return of which is in fact much higher than the seemingly low rate of interest attached to the investment.  

 To illustrate, if your income is liable to income-tax in the tax slab of 31.2%, you would be much better off with a 7.9% tax-free return on PPF, as compared to a 10% taxable return on a private deposit, because post-tax, your effective return would work out to only 6.88%.

2 Responses to “APPRECIATING THE TAX-WORTH OF AN INVESTMENT”

  1. Sanjay Rasotra says:

    Your articles on taxation subject are highly appreciable and useful for all tax payers. I am eagerly waiting for your new book on Taxation. I find your income tax ready reckoner published in guarati. I request you to have publications in the english also. I have seen your videos also on the tax guru.

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