10 tax-saving investment plans you can take advantage of
Life insurance is one of the most important and necessary needs to ensure a good and financially stable life for your family members. Even in your absence, the capital benefits of life insurance help your family build a safe and secure future. Additionally, there are tax benefits for life insurance under Sections 80C and 10D of the Income Tax Act.
Section 80C allows you to deduct up to 1.5 lakh of premiums paid for a life insurance policy, while Section 10 (10D) makes the income at maturity tax exempt provided the premium is less than 10% of the total insured or that the insured value is less than 10 times the premium.
However, if the total insured is less than 10 times the premium, you will benefit from a premium reduction of up to 10% of the sum insured. In this case, your deduction will be Rs.50,000 rather than Rs.1 lakh.
Health insurance is an important investment. It provides financial protection for you and your loved ones in the event of a medical emergency. A health insurance policy provides full coverage by helping you pay for the medical expenses specified in the policy, whether it is an emergency or scheduled hospitalization.
In addition to protecting your finances from escalating medical costs, you may also be eligible for tax relief on your health insurance payments under Section 80D of the Income Tax Act, subject to certain criteria. Therefore, buying health insurance is a wise investment.
Term insurance, the most basic form of life insurance policy, provides an individual with life insurance coverage for a set period of time in exchange for the regular payment of a set premium. If the life policyholder dies during the policy period, the policyholder will receive a death benefit as stipulated in the policy inclusion conditions.
The most basic term insurance tax benefits that every Indian taxpayer can avail of are governed by Section 80C of the Income Tax Act 1961. Indeed, many people believe that this section is the easiest way to most popular to save money on taxes. Term insurance premiums paid for acquiring policies are eligible for tax benefits of up to Rs. 1.5 lakh under this section.
You can maximize the tax benefits of term life insurance by purchasing a large life insurance policy for yourself, which will help your family members in the long run. When you buy a term plan, you can take advantage of not one, but multiple term insurance tax breaks. These benefits allow you to save money on taxes while protecting your loved one’s financial future.
Unit Linked Insurance Plans (ULIP)
A ULIP is a type of insurance that combines insurance and investment benefits into one package. ULIPs, or Unit Linked Insurance Plans, provide life insurance, which is a significant advantage over typical wealth building strategies. This not only helps your money grow, but it also protects the future of your loved ones from the unexpected twists and turns of life. When you buy an ULIP, part of the money is invested in stocks, debt securities or other securities, while the rest is used to provide insurance cover.
The premium paid for this type of coverage is deductible under section 80C of the tax code. In addition, under Section 10 of the Internal Revenue Code, policy maturity statements are tax-exempt (10D).
Employees’ Provident Fund (EPF)
Employers are required to deduct part of an employee’s pay and remit it to the EPF. Both the employee and the employer regularly pay a fixed percentage into the EPF account. Currently, the interest rate on EPF contributions is 8.5%. Individuals benefit from contributions to an EPF account through a deduction under Section 80C. The highest amount for tax deductions on EPF dues is Rs 1.5 lakhs. The interest rate is calculated using the employee’s base salary plus a component known as the dearness allowance in their total income. Upon retirement, the employee receives a lump sum payment that includes both personal and employer contributions, as well as interest on the money.
Public Provident Fund (PPF)
In terms of income tax, the PPF benefits from a triple exemption; this benefit is not available for many assets. You are excluded from paying taxes on your investments, adjustments and withdrawals. It provides for a deduction of up to Rs 1.5 lakh on investments made in each financial year under Section 80C of the Income Tax Act 1961. The current PPF interest rate is 7.1%. The interest you earn each year is also tax exempt. Finally, the accumulated corpus that you withdraw at maturity is tax-exempt, making it tax-exempt income. Although the EPF now has the highest interest rate, the PPF interest rate is not far behind. However, this investment option is only available to employees. PPF, on the other hand, is a product that even freelancers can invest their money in.
National Pension System (NPS)
The NPS is a defined contribution product with a market relationship. The NPS, like the PPF and the EPF, is a defined contribution voluntary pension scheme which has EEA (Exempt-Exempt-Exempt) status in India, which means that the entire corpus is exempt from tax at maturity and that the full amount of the pension withdrawal is taxable. free.
Tax saving fixed deposit with 5 year lock-in
Fixed deposit (FD) accounts have long been a popular way to save money because they are not subject to market fluctuations and offer a fixed interest rate at maturity. A tax-saving fixed deposit is the same as any other fixed deposit in that you deposit a set amount of money and receive a certain annual return. Fixed deposit accounts are divided into several types based on account features, type of account holder and reason for opening the account. Many risk-averse people use tax-saving FD accounts with a minimum lock-in time of five years to save money on taxes. Section 80C of the Income Tax Act 1961 allows a tax deduction on such deposits. The interest rate on FDs is significantly higher than the interest rate on a standard savings account. Investors can withdraw their funds after the term of the deposit.
Savings Scheme for Senior Citizens (SCSS)
An SCSS account is an account guaranteed by the Government of India that provides retirement benefits. Senior citizens in India can enjoy the benefits of the account by making a lump sum investment in the plan either individually or collectively. After retirement, the account will give monthly income as well as tax benefits. The plan pays a high interest rate on the deposit. Section 80C of the Indian Tax Act, 1961 allows you to deduct up to Rs. 1.5 lakh in income tax. The 5-year term of the account can be extended for an additional three years.
Equity Linked Savings Scheme (ELSS)
ELSS is a type of mutual fund that invests primarily in the stock market. Under section 80C of the Income Tax Act 1961, an equity-linked savings scheme, or ELSS, is a tax-saving investment. You can avail a tax credit of up to Rs 1,50,000 per year and save up to Rs 46,800 per year by investing in ELSS. The only type of mutual fund eligible for tax benefits under Section 80C is an ELSS. The advantage of ELSS over other tax-saving devices is that it has a three-year lock-in period.