Savings plans, also known as savings and investment plans in India, are investment solutions that allow you to build money for tomorrow. Every person has aspirations and objectives that extend beyond the basic needs of existence. To meet objectives, one frequently needs funds that have been built over time. Savings and investment programs enable you to save your money methodically to achieve a variety of goals. Having said that, have you ever asked yourself the following questions?
What can I do to lower my taxable income?
Where can I invest safely to save taxes?
These two essential issues will be confronted by every person, whether they are just commencing out in their job or are gradually working their way up the scale.
To resolve the aforementioned questions, it is essential to invest in tax-saving tools from the start so that you are not overloaded at the conclusion of the fiscal year. Section 80C of the Indian Income Tax Act of 1961 allows taxpayers across the nation to deduct up to 1.5 lakh per year from their gross income for qualified investments and certain costs. It is critical to understand not just the numerous types of tax-saving tools, but also to identify and relate them to your own investment goals. We have described Section 80C of the Indian Income Tax Act for your convenience and to assist you in determining which investment strategy is the finest for tax savings.
Best tax-saving options in India
There are various tax savings products in the industry that can lawfully lower your tax obligation. But, rather than arbitrarily picking any tax-saving device that you believe would help you save large taxes, it is critical to select solutions that are appropriate for your age and offer long-term advantages. Now let us look at a few of the common tax-saving insurance plans that may help you lawfully preserve a portion of your tax payments while also providing financial security for you and your family in the case of an unexpected incident.Section 80C
Section 80C of the Income Tax Act of 1961 lowers your tax liability by enabling exemptions from your taxable amount in a fiscal year. Today, the highest deduction permitted under Section 80C in a fiscal year is Rs 1,50,000.Life Insurance
Life Insurance is one such option available which not only helps you lower your taxable income but also gives you an essential life cover that comes in handy in case of any mishap in your life as it gives financial support to your family after your sudden demise. There are many options available under life insurance, I believe Term Life Insurance and ULIPs are the best investment options available in the market.Term Life Insurance
Term Life Insurance, a simple insurance coverage plan, is one of the most popular insurance policies that can help you get tax breaks under Section 80C. In the event of the policyholder's early demise, a term life insurance plan pays out the whole sum promised to beneficiaries. Premiums paid to insure oneself, one's spouse, and one's children are tax exempt.The dividend paid by the beneficiaries on the demise of the insured is totally excluded from the income tax deduction, which is an extraordinary advantage of investing in a term life insurance policy.
ULIPs
Aside from term life insurance, you might also buy in the latest-popular Unit Linked Insurance Plans (ULIPs). People like ULIPs because they have low fees, more clarity, and a tax-free maturity advantage. They may be purchased for a duration of 15, 20, 25, or 30 years, according to your financial goals. ULIPs are the greatest choice for persons who have a low-risk tolerance and are searching for secure investment solutions.Whereas if total yearly insurance premiums for ULIP investments in a particular fiscal year are less than 2.5 lakhs, the maturation benefits obtained are totally free from taxes under Section 10. (10D). If the total yearly payment surpasses 2.5 lakhs, the maturation benefits are considered Long Term Capital Gains (LTCG) and are taxed correspondingly. This tariff applies to plans purchased on or after February 1, 2021.
Section 80D
The highest sum for which you can claim deductions in Section 80D of the Income Tax Act is Rs 1 lakh. This part of the Income Tax Act is devoted to payments made to purchase health coverage for oneself, one's spouse, one's children, and one's parents.In a particular fiscal year, you can claim a total deduction of Rs 25,000 for purchasing medical insurance for you, your wife, and your kids. But, if you are a senior person, you can deduct up to Rs 50,000 from the cost of health insurance coverage.
A person becomes a senior citizen of India when he or she reaches the age of 60. Altogether, you may claim a total tax deduction of Rs 50,000 if you acquire a health care plan for your dependents as well as your parents. If you and your parents are both over the age of 60, you can claim a total deduction of Rs 1 lakh.
You can obtain the greatest tax refund on your total taxable earnings by purchasing tax-saving products under both Section 80C and Section 80D of the Income Tax Act. For example, if your yearly income is Rs 10 LPA, you may lower your taxable income to Rs 7.5 LPA by taking full benefit of both provisions.
