Earning money has never been simple, for it requires not just hard work, but also smart planning and persistence. That is why money-making is nothing less than a game. And, this game is also beset with challenges in the form of taxes which take a considerable portion of your hard-earned income away from you. However, just like playing a game requires you to learn how to shield yourself from obstructions, you also need to learn tax-saving tips to successfully achieve your annual financial goals.
Therefore, to get it right, you need to know some tax-saving plans which are subject to income tax saving sections. So, given below are some best saving plans for short term and long term that can help you save tax very well-
1. National Pension Scheme
National Pension System (NPS), a government-sponsored scheme allows you to regularly contribute a part of your income to your pension account, throughout working life. Then at the time of retirement, you receive a portion of this corpus in the form of a lump sum. Also, you can use the remaining part of the corpus to buy an annuity, which will offer you a regular income after retirement.
As per Sec 80C of the Income Tax Act 1960, a total deduction of Rs. 1.5 lakh is allowed on all investment instruments. NPS is also covered under the provisions of this section, meaning having this instrument can save you taxes quite well. Moreover, interest received from PPF is tax-free, and no wealth tax is charged on PPF accounts and proceeds.
2. Term Plan with Return of Premium Feature
A term plan offers you an excellent way to secure your family even in your absence. For a basic premium that is paid each month, the term plan provides your family with the sum assured if you meet with an untimely demise during the term. Moreover, on buying a term plan with return of premium feature, along with death benefit that your family shall receive, you will also receive the sum of total premiums paid at the end of the term.
The premiums paid towards this plan are subject to deductions as mentioned under Sec 80C of the Act, up to limit of Rs. 1.5 lakh. Moreover, if your policy was issued on or after April 1, 2012, you will also get a deduction of 10% on the total sum assured. This deduction will equal 155 of the sum assured if you’re suffering from any ailment as mentioned under Section 80 DDB or any disability covered under 80U.
Not only this, but Sec 10(10D) also offers you tax exemption on the maturity amount (return of premium) and the death benefit received.
3. Unit Linked Insurance Plan
Another lucrative tax-saving plan is the Unit Linked Insurance plan that offers you twin benefits of both securing your loved ones and bringing you high returns to realize your dreams. In this, a part of the premium that you pay gets invested in different funds. Therefore, with this plan, your loved ones receive the sum assured in the form of the death benefit while you also receive returns on your invested money.
This plan is also covered under Section 80C, which means that you can claim a deduction of about Rs. 1.5 lakh by investing in this instrument. So, with multiple benefits that ULIP offers, it is a holistic tool that is worth considering.
4. Health Plans
Another excellent plan for you could be a health insurance cover. Having this policy will help you maintain financial stability when faced with a medical emergency, along with enabling you to enjoy tax benefits.
Section 80D of Income Tax Act allows you a total deduction of up to Rs.25,000 for a medical policy that may be in your name or that of your spouse, dependent kids or parents (below the age of 60). Also, if your parents are aged more than 60 years old, then you can claim a deduction of Rs.50,000 every budgetary year.
Moreover, you may even consider buying specific illness plans such as against cancer, given its fast-increasing prevalence and costly treatment. Cancer insurance plan, as offered by reputable insurers like Max Life Insurance provides 100% sum assured during the last stage of cancer and offers multiple claims for early-stage cancer detection. Also, with every claim-free year, you can increase your coverage furthermore.
5. Public Provident Fund (PPF)
PPF is a savings instrument offered by the government. It helps you mobilize your savings, along with earning you returns on the money saved. The interest on the money deposited is paid by the government and is fixed each year.
It is a long-term instrument with a maturity period of 15 years. You can start this account by depositing as low as Rs. 100. This fund instrument is also covered under Section 80C, that allows a total deduction of up to Rs. 1.5 lakh. So, include this in your financial planning and enjoy all the tax-saving benefits in store.
So, now that you know all the income tax saving sections and a few best saving plans for short term and long term wait no more. Use these instruments to shield yourself from taxes to reach your financial goals. Be proactive and buy one or more such plan.
