Investments can be a crucial part of your financial portfolio. While many of you might utilize investment tools to grow your life long savings, the rest of you might aim to reduce your tax liability. Since tax planning can be an inevitable aspect of your life, it can be crucial to look for investment plans that can allow you to save more taxes for the current financial year.
Before you begin your tax planning for the current financial year, let’s go through the different types of investment vehicles that can let you save taxes with ease:
- Unit Linked Insurance Plan (ULIP)
A ULIP plan can be the only financial product that can offer dual-benefits of investment and insurance as well as taxes. While you can fulfil your investment and insurance needs with a ULIP policy, it can provide tax exemptions on premium as well as maturity proceeds according to Section 80C and Section 10(10D) of the Income Tax Act, 1961 respectively. While you can be eligible to claim a deduction up to Rs. 1.5 Lakh on your taxable income as per Section 80C, your insurer can provide your nominees with a tax-free payout after your demise in accordance with Section 10(10D).
- Life Insurance (LI)
Life insurance policies are protection plans that work on the primary objective of financial security. Apart from financial protection, many of you might purchase life insurance policies to reduce your tax liability. Since a lot of insurance policies fall under Section 80C, you can be eligible to receive tax benefits that can let you claim a deduction up to Rs. 1.5 Lakh on your taxable income. Besides, there are a few insurance plans, such as term life insurance that can offer a financial payout to your nominees, which can be exempted from the payment of taxes in your absence under Section 10(10D).
- Public Provident Fund (PPF)
PPF can be one of the most popular types of investment plans present in the market. Since it can be backed by the government of India, many of you might trust it for its credibility and safety. A PPF account can provide you with attractive interest rates as well as better returns on investment. Besides, it can also allow you to save taxes since it can fall under Section 80C of the Income Tax Act, 1961. As an account holder, you can qualify to claim up to Rs. 1,50,000 on your taxable income on investing in PPFs.
- Pension plans
Pension plans can provide you with a regular flow of income after retirement. With the generated income from pension plans, you can fulfil your monthly needs, such as groceries, utility bills, rent payment, etc. Apart from acting as a financial back up after retirement, pension plans can be beneficial in saving taxes. There are various pension plans, such as National Pension Scheme (NPS), Senior Citizens Savings Scheme (SCSS), National Savings Certificate (NSC), which can allow you to claim deductions, according to Section 80C of the Income Tax Act, 1961.
To conclude, tax payments can become a mandate after you start earning. As a tax-payer, you can choose the above-mentioned tax saving investment options for the current financial year. Before you select an investment option, consider your financial goals and requirements. Moreover, you should consult a financial expert to ensure a smooth tax-filing process with the right investment option for you.