Tax planning activity is not something you should undertake right before the end of the financial year. Not planning these things well in advance can lead to loss of income and also cost you a fortune later in life. When you are planning your income tax saving schemes, they should not be done on an ad-hoc basis or to only save tax. When done the right way, these investments can help you sail through in life and protect your loved ones during uncertain times.
But is it enough to plan your income tax saving schemes early? The answer is no. The trick lies in choosing the right tax-saving vehicle that will not only help you save tax but also educate you about your options so that you can reinvest the saved amount to grow your corpus of funds.
If you don’t want to end up with a large sum of money owed in taxes at the end of the year, then you must look for the best investment plan under the Indian tax system and claim deductions along the way when filing for your income tax.
Here are the four meaningful ways you can use your tax-saving this year.
1. Unit Linked Insurance Plans
Unit Linked Insurance Plans have become a simplified income tax saving scheme due to its low cost and high returns. This instrument uses the power of compounding to turn your investment and insurance plan into a money-making project. The only thing, though, is that you must ensure that your investments are pegged for a longer duration of at least 10-15 years. ULIPs work best when you have time on your hands so that they can accumulate interest over interest to expand your corpus. Besides, all the investments made in ULIPs are eligible for deductions up to Rs. 1.5L as per section 80C of the income tax Act, 1961. Therefore, you are not only making money but also saving it with ULIPs.
2. Life Insurance
Life insurance is the safest and the most common income tax saving scheme under the Indian tax system that offers significant financial cover to your loved ones and yourself. By choosing the right term insurance, you can not only save yourself significant amounts of money in taxes under section 80C of Income Tax Act, 1961 but also secure the financial interests of your family, in case something happens to you. Income Tax Act also allows the life insurance pay-outs to be tax-free as well.
Many flexible term insurance plans are geared towards supplementing your wealth and also providing you with the security that your family’s financial interests will be safe. If you want to ensure that your insurance provider pays you in case you outlive the policy term, then you can look into the return on premium options. There are also many rider options, such as critical illness, that can enhance the scope of your coverage and protect you against several significant diseases by providing you financial assistance.
This is the reason term life insurance is considered as one of the best investment plans with plentiful tax benefits and returns.
3. Retirement Planning
Retirement is meant to be an extended vacation, a payoff for years of relentless service to your familiar responsibilities.
Retirement is when you should be free to anything you have forsaken to pay for your child’s education, your parents’ well being, and securing their financial freedom. Take long siestas, lunches, indulge in your favorite hobbies, travel the world, or do whatever you want because you were smart about your income tax saving scheme.
These are some of the best investment plans that will last you a lifetime and your family long after that.
If you want to reap the benefits of all the hard work in your younger years, then you must plan your retirement investments as early as possible. With rising inflation, this timely investment will save you lots of money in taxes and also provide you with a stable source of income post-retirement.
Retirement plans are not just income tax saving schemes; they are well-designed insurance products that will offer you an income when you stop working. Some of these pension plans will help you invest your earnings in the best investment plans to help you create a corpus of funds over the years that you can withdraw as a whole or as a monthly income to pay for your financial needs.
There are many plans out there that will give you the flexibility of choosing between market-linked pension plans or conventional pension plans as per your risk appetite.
4. Cancer Insurance Cover
Lives are stressful these days and lifestyle disorders too rampant to ignore. Believe it or not, cancer stats in India are abysmal and frightening. Apart from being a debilitating disease, it is an expensive one that will make it difficult to pay for the care unless you have some financial support. This is where cancer insurance cover comes in.
As you know that cancer care can be expensive. Apart from being a robust income tax saving scheme, cancer insurance cover will protect your family against paying for long-term cancer care—no need to dig into your rainy-day savings to pay for your treatment. Instead, use the comprehensive cover of cancer insurance to meet all the expenses.
If you want to save tax and expand your wealth with the best investment plans, then these options are just some of the many you can explore. There are also several other financial instruments provided by insurers such as Max Life Insurance that can help you save tax and enhance your portfolio at the same time.