Just imagine that you walk up to a river to fill a vessel of water. However, because of a hole in the vessel, by the time you reach back, half the water in it gets leaked. This happens several times and leaves you disappointed with the loss until you finally decide to replace the vessel.
Similarly, tax can be a likened to a hole in your income, one that reduces your overall earning and your joy, both. However, the good thing is, that in some cases, just like the vessel, choosing the right investments, can save you much loss.
Yes, by this, we are referring to the tax-saving investments. Having such instruments in your investment portfolio will ensure that you don’t lose out on your returns and maximize your wealth in the long run.
So, spend considerable time in investment planning to find options that can minimize your tax outgo. For this purpose, you can include some of the best investment plans to save tax in your portfolio, which include:
Unit Linked Insurance Plan (ULIP)
A ULIP is a two in one plan that provides you both insurance cover and investment returns. Linked to the investment market, this plan invests a part of your premium in equity, debt, or balanced funds. This helps you accumulate returns over the years, along with securing your loved ones at the same time.
However, what makes it a favourable policy for your portfolio is that whatever payout you receive, whether as a death benefit or accumulated invested returns, they are all free from tax deductions. Moreover, the premiums that you pay towards this policy can also be claimed as a deduction from your taxable income.
Equity Linked Savings Scheme
Equity-linked savings scheme (ELSS) is a type of equity mutual fund that invests at least 80% of its total assets into equity and equity-related instruments.
It comes with a statutory lock-in period of 3 years and offers good returns to investors. What makes this a preferable option is that it qualifies for tax exemption under section 80C of the Income Tax Act. The maximum tax exemption allowed is up to Rs. 1,50,000. Also, although the returns on ELSS funds are subject to a long-term capital gains tax (LTCG) at 10%, but gains up to Rs. 1 lakh per year are exempt from tax.
Health Insurance Plans
Considering a health insurance policyat the time of investment planning is essential because it helps you maintain financial stability while meeting medical emergencies.Also, it can be a great instrument for you to save income tax annually.
Under section 80D of the Income Tax Act, you can claim premium paid towards the policy, as a tax exemption up to the value of Rs. 25,000 each year. However, if your age is 60 years or above, then section 80D exempts you for up to Rs. 50,000.
Also, you may even claim additional tax-saving benefit if you pay premiums on health cover that is availed by your parents. This allows you a deduction up to Rs. 50,000 for either of your parents, who are above 60 years of age.
A term plan offers you assured life cover at a reasonable premium while providing your family with financial security after you pass away. However, what makes this even more preferred by policyholders is the tax benefits that it offers. While the premium paid is exempt up to a limit of 1.5 lakh under section 80C, the death benefit is fully exempt from tax.
However, the laws also state that any policy issued on or after April1, 2012, gets a maximum tax exemption limited to 10% of the sum assured.
Public Provident Fund
Best investment plans to save tax also includes PPF. A 15-year long investment, PPF is a government-backed scheme that offers you attractive interest rates annually. Also, the fact that the returns are entirely tax-free makes this a good investment that you can consider.
From a minimum amount of Rs. 500 to a maximum of Rs. 1,50,000 in a year, you can systematically save and earn through this investment. You can also avail facilities such as loan, withdrawal, or extension of account according to your needs.
Wealth Saved Is Wealth Created
Just like the popular saying – “A penny saved is a penny earned”, similarly, tax-saving can help you create money in the long-run. So, minimize your tax burden and maximize your earnings by buying tax-saving investments.
Reputable insurers like Max Life Insurance offer many such tax-saving instruments that can help you achieve all your financial goals. With claim settlement ratio of 98.26%, you can be assured of putting your finances in the right place.
So, when you take out time for investment planning, identify the investments that can help you save on taxes. This will maximize your returns and satisfaction, both.