Each and everyone one of us thrives hard to earn money, and we struggle much more to keep that money safe. We look for every nook to try and save even a single penny of our hard-earned money. While some of the expenses in life cannot be avoided, yet there are places where saving money is possible. One such option is through taxes.
Paying tax is important,and it accounts for a lot of money from your savings. However, the government allows many tax saving options to ease its burden. Some of you might know about a few ways of saving taxes and are even using those options for getting tax exemptions. However, there is much more to tax saving investments.
In this article, we have noted down some plans that can help you increase your tax savings. Read on to know more.
1. Term Insurance
A term insurance policy acts as an income replacement instrument in case the primary bread-winner of the family passes away. Every financial advisor in the world describes term plan as the best insurance policy a person can purchase.
As far as tax saving is concerned, the premiums paid towards a term insurance policy are eligible for tax benefits under section 80C. Under this, you can claim a deduction up to Rs 1.5 lakh in a financial year for the premiums paid for yourself, your children and your spouse.
2. Health Insurance
After term insurance, a health insurance policy is perhaps the most essential plan that you must have in your investment portfolio. A health insurance plan offers more than reimbursement for expenses incurred during medical treatment.
Similar to term insurance, investments in health plan also qualify for tax deductions under Section 80D. Under this plan, you can claim tax deductions up to Rs. 25,000 (for self, spouse and child) and Rs. 50,000 (In case the policy is for a senior citizen).
A combination of protection and wealth creation, ULIP plan is a hybrid product of the insurance sector. It not only allows you to channel your savings into the market-linked funds but also provides life cover. This allows you in meeting long-term goals without extra risks.
In most ULIPs, there are various fund options with different asset allocation between equity and debt. Moreover, when you invest in a ULIP plan, you become eligible to claim tax deductions up to Rs. 1,50,000 under Section 80C.
PPF or Public Provident Fund has been the favourite savings avenue for the majority of investors in India. You can open a PPF account in your own name or on behalf of a minor. From Rs. 500 to Rs 1,50,000, you can deposit any amount to keep the account active.
In addition, the deposits made towards your PPF account are eligible for tax deductions under Section 80C. It allows a deduction up to Rs. 1,50,000 per year inclusive of all the investment instruments.
Equity-linked Savings Schemes or ELSS, are diversified equity mutual funds. These schemes are best if you are looking for a short-term investment option as the lock-in period is only for 3 years. Moreover, the investment amount in ELSS qualifies for tax deductions under Section 80C. You can claim tax exemptions up to Rs. 1,50,000 by investing in ELSS.
But you must remember that not all investments in mutual funds schemes are eligible for tax deductions. Therefore, invest in ELSS if you are looking to save taxes on your mutual fund investments.
Investment in tax-saving instruments is essential, but the decision should also depend on your financial situations and future goals. If you have not invested in these plans and have filed your taxes, you must have paid a lot more money. But don’t worry, as the tax season is near, you can start investing in these instruments to claim better deductions the next time.
Moreover, if you are confused about how to choose the best insurance policy or an excellent investment option, why not use the internet. Thanks to digitalization, you can now compare various products provided by leading insurers like Future Generali to make a preferred choice.