Tax planning or tax saving is an integral part of fiscal planning. If sensibly done, it can perform dual objectives, i.e. assist individuals to meet their fiscal goals and save tax in this process. There are several insurance avenues, which can assist you in maximizing tax savings. These avenues include life insurance, pension plans, health insurance or Mediclaim, NPS, and Mutual Funds. Let’s look at the best tax-saving investments: HDFC life under Section 80C.
Life insurance is an imperative part of the financial portfolio of an individual. HDFC Life Insurance Tax saving plans offer financial cover to the family of the individual when he will not be around.
This is the reason for the bread-earner to buy a life insurance policy as early as possible to secure his family.
Life insurance products come in several forms term plans, endowment plans, and money back plans, whole-life plans, ULIPs, or unit-linked plans being the most significant.
All insurance plans are equal before the law from a tax-saving perspective. So, despite the consequences, of the life insurance plan, there is an assurance for tax-saving. The payment of premiums made for these policies assist in availing tax rebates and therefore they are some of the vital tax-saving plans that one must consider.
Pension plans, also known as annuity plans are a different form of life insurance that has a different end-objective. While the life insurance plan is equipped to secure the family of the individual on his demise, the pension plan is designed to offer for the individual and his loved ones if he lives on.
Two phases scatter the pension process namely, withdrawal and accumulation. In the phase of accumulation, the money in his earning years is kept aside by the individual. Retirement lashes out in the withdrawal phase.
Tax benefits can be availed only in the accumulation phase.
Health Insurance, popularly known as Mediclaim, covers all the expenses that are incurred from hospitalization or an accident. It also covers pre-hospitalisation and post-hospitalisation expenses, depending on the assured amount.
Tax benefits are offered by health insurance. A sum of Rs. 20, 000 paid as a premium for insurance by senior citizens and Rs. 15, 000 for others qualify for tax benefits, consequently ascertaining to be one of the proficient tax-saving investments.
National Pension Scheme (NPS)
Regulated by the Pension Funds Regulatory and Development Authority (PFRDA), the New Pension Scheme is another form of investment to avail of tax rebates. Any Indian citizen falling in the age bracket of 18-60 years can invest in NPS. It is awfully cost-effective as the charges for fund management are low. The money is managed in three spate accounts by the fund managers having distinct asset profiles namely, corporate bonds (C), Government securities (G), and Equity (E). The investors can make choices for the management of their portfolio, i.e. active choice (actively) or auto choice (passively).
Section 80 CCD of the Income Tax Act 1961 covers the contributions made to the NPS. The collective deduction limit cannot exceed Rs. 1.5 lakhs under this section together with Sections 80 CCC and Section 80 C.
Investments made in mutual funds, also called Equity-Linked Savings Scheme-ELSS, are eligible to avail tax benefits. Here the investors have medium to high-risk appetite. The lock-in period for the investment is three years.
Investments made towards mutual funds are covered u/s 80C of the Income Tax Act up to Rs. 1.5 lakhs.