5 Substantial Investment Ideas for Tax Benefits
Investments have become effective channels for meeting life goals and achieving personal wealth. At different stages in our lives, we need to gear up for different roles. As you surpass the different stages in life, financial commitments keep increasing. Higher education, marriage, children, parents, and the list goes on. When you are the only earning member, the major quantum of responsibility remains with you. You have to ensure that you protect your family financially, even after your unexpected demise.
Generally, we tirelessly earn for many years and would have concentrated on spending money for daily requirements, paying taxes* and saving money for the future. But have you been introduced to the investment options for an income tax* benefit? Here are a few ideas to make a smart investment plan.
A life insurance policy is an essential in a common man’s life. It helps individuals invest the money as monthly premiums to secure the financial obligations of their families even after they are no more. It is a good option to save money. However, it will serve as a good savings option for higher education, children’s education, marriage etc.
Premium amounts paid towards purchasing life insurance for insuring self, spouse and children qualify for tax deduction under Section 80C of the Income Tax Act, 1961. You can claim a maximum deduction of Rs. 1,50,000 under this provision. You can also purchase medical insurance that allows a maximum deduction of Rs. 75,000 under Section 80D. It is considered for the premium paid for self, spouse and the parents who are currently dependent.
Tata AIA insurance tax benefits are well documented for the different life insurance plans for easy understanding.
Unit Linked Insurance Plan (ULIP) is a type of endowment life insurance plan. It is one of the tax-saving investments which also provides life protection. In this scheme, one part of the premium is paid towards life cover, and the other part is used to purchase equity, debt or hybrid funds. Like any other life insurance plan, you can enhance the sum assured by opting for relevant riders#.
As far as the investment is concerned, you can choose to invest in different funds provided. If you can take up the high risk for a good return, invest in equity funds. If your risk profile is moderate or low, you can go for a hybrid or debt fund. You can switch between the funds as and when time and situation demand. There is a five-year lock-in period after which you can partially withdraw funds if required. It is an ideal option for people looking for long-term investment and insurance benefits.
The premium amount paid for a ULIP becomes eligible for tax deduction under Section 80C. The respective returns for income tax* exemptions under Section 10(10D), subject to specific conditions.
The National Pension Scheme is a government-sponsored pension scheme that is an appropriate tax saving investment option. An individual availing of this option will contribute the fund to a pension account. One part of the lump sum can be withdrawn for personal commitments, while you can use the other part of the fund for getting a regular income post-retirement.
Section 80CCC allows for claiming a deduction on the premium amount paid towards an annuity pension plan for pension fund requirements. The maximum acceptable claim is Rs. 1,50,000 annually. The returns from the insurance companies as against these payments are also exempted from income tax calculation under Section 10(10D) subject to fulfilment of conditions mentioned in section 10(23AAB). All other returns from pension plans are taxable.
Insurance companies provide customizable annuity plans for accumulating a retirement corpus easily. There is a guaranteed monthly income plan (UIN- 110N147V02) wherein you can pay monthly premiums for a life cover and a guaranteed1 income every month post maturity for a set period. With these plans, you get a life cover, monthly income and tax benefits as well.
Home loans help us in reducing taxable income. The part of the home loan paid towards principal repayment qualifies for tax deduction under Section 80C up to Rs. 1,50,000. You can also claim the interest paid on a home loan for tax deduction under Section 24 up to Rs. 2 Lakhs.
Section 80EE also provides an option to claim a deduction of Rs. 50,000 over the limit of Section 24. These are subject to certain terms and conditions. You should contact a Chartered Accountant or tax advisor for the latest rules.
Equity Linked Savings Schemes (ELSS)
Equity Linked Savings Scheme is a type of mutual fund with a three-year lock-in period. It is the only mutual fund option that will help you avail of tax benefits under section 80C. The corresponding investments are made in equity markets. Therefore, the returns are high over a long period.
You can invest in ELSS through a Systematic Investment Plan wherein you will pay a small amount every month to purchase units in the fund. As far as the returns are considered, earnings exceeding Rs. 1,00,000 in a financial year are subject to long-term capital gains tax of 10 per cent.
We have seen some of the investment ideas for tax benefits. Once you start investing in such options, you will feel satisfied with securing your family’s financial commitments on time. Even under your absence, your dependents will have a way to manage their daily expenses and bring into reality their long-term goals such as education, marriage etc. Purchase life insurance online and include all the different requirements through investment schemes to have a wholesome advantage. However, concentrate on tax saving investment options as well to invest your money efficiently.