Tax saving today is good for you tomorrow. Here’s how

Sandeep is an insurance salesman.

He has been working at this job for the past six years. As an Indian citizen, he follows the law diligently. This means, he pays his taxes on time.

But what he didn’t know was that he could avail tax exemptions if he invested his money. In other words, he didn’t bother to use tax saving to his advantage.

As a result, he has lost numerous investing opportunities over the years that could help him increase his future savings.

Don’t be like Sandeep.

Tax saved today is an investment for tomorrow. So from an investment point of view, you now have a greater amount of money at your disposal. This money can be used as a pool for future expenses or investments.

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Here’s how you can implement tax saving methods to your advantage and build a roadmap to future savings.Equity Linked Savings Scheme (ELSS)

       1. Equity Linked Savings Scheme (ELSS)

An ELSS fund doesn’t just help you to save tax but also provides you with the opportunity to build wealth. Under Section 80C of the Income Tax act, salaried individuals can avail exemption of upto Rs 1.5 lakh when they invest in ELSS funds. These funds have a lock-in period of 3 years. However, the capital gains you receive from these funds are completely tax-free. By investing through a Systematic Investment Plan (SIP), you can increase your earnings in a disciplined manner.

      2. Public Provident Fund (PPF)

PPF is probably the most popular investment avenue in India. The main aim of this scheme is to encourage people to increase their savings. Due to this, the minimum deposit required is just Rs 500 every year. With an interest rate of 8.1% compounded annually, the returns on PPF are much better than many other investment avenues. And the best part is that the interest you earn is completely tax-free.

      3. Life Insurance Plan

Many people think that life insurance is an expense. Nothing could be farther than the truth. Life insurance is nothing but an investment on your future. It is always better to be prepared against any unforeseen circumstances.

A life insurance policy ensures protection for yourself and your family. There are different kinds of policies which offer different benefits. A term insurance policy offers financial coverage to the policy holder for a specific time period. An endowment policy pays a lump sum to the policy holder on maturity of the policy or on death. But in case you are interested in an insurance policy that doubles as an investment scheme, ULIPs are the best option.

But from a tax saving perspective, all life insurance policies offer the same benefit. The maximum tax deduction that can be claimed is Rs 1.5 lakh. In addition, the insurance proceeds upon maturity or death are tax-free under Section 10(10D).

      4. Tax-saving Fixed Deposits

Unlike regular FDs, tax-saving fixed deposits offer tax breaks to investors. However, they also come with a lock-in period of 5 years. So be careful not to break the fund before the tenure is completed. The interest rate on these deposits can vary between different banks. But in general, you will find that the rates range anywhere between 7-9%.

Tax-saving FDs offer complete capital protection and the returns are guaranteed to the investor. But you should also take note of the fact that the interest you earn is added to taxable income upon maturity of the deposit.

      5. Health Insurance Plan

Not many are aware but under Section 80D of the Income-tax Act, you can actually avail tax benefits on your health insurance policy. Provided that your age is not above 60 years, you are eligible to avail maximum deduction of Rs. 25,000 a year.

Keeping in mind today’s fast-paced lifestyle, life-threatening ailments are catching up at an early age. So, it’s always good to protect yourself and your family from unforeseen financial hurdles. That’s why having a Cancer protection health plan makes more sense. Not only do you safeguard your family from financial troubles in the future but also get the much-needed tax relief for saving income in the present.

In addition to these, senior citizens can consider investing in Senior Citizens Savings Scheme (SCSS).

Right now, your income might be more than enough for you to live comfortably. But that may not be the case as you grow older and your responsibilities increase. Investing your money can be a great way to increase your wealth over time. So without wasting any more time, start investing in tax deduction schemes.

This is a partnered post by Future Generali Life Insurance.

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Updated Date: Feb 27, 2017 13:49:42 IST

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