How Can You Grow Wealth and Save Tax Simultaneously?

9-July-2021 |

Your financial future is dependent on how well you earn, save and invest today. However, irrespective of how much you earn, if you do not invest it wisely, you might end up eroding a big part of your corpus. This is because as you earn a higher amount, your tax liability will increase. But if you make the right tax-saving* investments in the present, you will be able to save tax and also accumulate a significantly larger corpus for your future.

A good way to earn high returns is by investing in market-based securities. However, market-linked investment options also carry a high level of risk. Hence, experts recommend creating a well-diversified portfolio that includes market-linked securities as well as secure investment options like a savings plan.

Let’s discuss how a savings plan helps you save tax and grow your wealth simultaneously:

What is a savings plan?

A savings plan is a tax-saving option that helps you grow wealth as well as save tax. A savings plan in India is considered one of the safest tax-saving investments because they are not linked to the market. Savings plans are essentially life insurance policies that allow you to make systematic and disciplined investments, ensuring you and your family achieve your financial goals.

A savings plan in India gives you the dual benefit of insurance and assured returns. The insurance cover ensures that your family is financially secure in case of your unfortunate demise during the savings plan tenure. The death benefit received by the family enables them to meet their living expenses, maintain their standard of living and achieve their desired life goals, even when you are gone. The savings plan in India also gives you the option to enhance your insurance cover by opting for additional riders#.

Alternatively, the assured returns offered by the savings plan help you meet your financial targets when you are alive. You can get your benefits from the savings plan in the form of regular income and use the money to meet financial goals, such as sponsor the education of your child, pay your home loan EMIs, buy a car, travel the world, create a retirement corpus and do much more.

Apart from providing assured returns along with a secure life cover, a savings plan is also a wise tax-saving option. The premiums you pay for the savings plan in India are deductible from taxable income under Section 80C of the Income Tax Act, 1961. Moreover, the maturity benefit you receive (whether as a lump sum or as regular income) is also exempt from taxes under Section 10(10D). The death benefit received by your family in case of your unfortunate demise during the saving plan tenure is also exempt from taxes under Section 10(10D).

Choosing the right savings plan that offers competitive returns and flexible features that cater to your needs can be one of the best investment decisions you make. A savings plan in India gives you a triple advantage. You get tax benefits, insurance cover and assured benefits that enable you to create a significant corpus in the long run. Savings plan are a great tool to begin your savings journey with a low-risk option that also gives you insurance protection.

 

How much should you invest in a savings plan to save tax?

A savings plan in India is considered a wise tax-saving investment. In comparison to other tax-saving options, saving plans are safe and come with low risk as they are not linked to the market. Hence, the returns you receive on the saving plan investments are guaranteed1 and not affected by the fluctuations in the market.

Ideally, Section 80C allows you to avail deduction up to Rs. 1.5 lakhs annually on tax-saving investments, such as a savings plan, National Pension Scheme (NPS), mutual funds, Public Provident Fund (PPF), ULIPs (Unit Linked Insurance Plans) and more. The choice of the tax-saving scheme depends on your risk tolerance, investment horizon and financial objective.

Market-linked investment schemes that offer high returns also carry a high risk. However, if you choose to invest in a savings plan, you get safe and competitive returns along with insurance cover. So, if you are a risk-averse investor, you can maximise your tax-saving benefits by investing in a saving plan.

Moreover, unlike other tax-saving options such as mutual funds and ULIPs, the returns you get on your savings plan are completely tax-exempt under Section 10(10D). This means that the premiums you pay for your savings plan give you the tax benefit, whereas the money you receive from these plans is also not taxable at your hands.

 

What are the different benefits of investing in a savings plan?

A savings plan is an advantageous investment for all types of investors - young or seasoned, low-income earners or high-income earners and risk-averse or risk-takers. Here are some of the top benefits of investing in a savings plan in India:

 

  • Financial protection: Savings plan gives you a secure life insurance cover so that your loved ones do not suffer in case of your untimely demise and the consequent loss of income.

  • Financial discipline: When you invest in a savings plan, you contribute a part of your income regularly into the savings plan. This helps inculcate the habit of saving and live within a defined budget, curtailing unnecessary expenditure.

  • Long-term planning: Savings plan in India can help you accumulate wealth over time by growing your corpus through regular premiums. This helps you systematically meet your goals, whether it is purchasing an asset, funding the education of your child, sponsoring the marriage of your child or creating a retirement nest egg.

  • Tax benefits: One of the most critical benefits of investing in a savings plan is the tax benefits offered by these policies on the premiums you pay and the maturity and death benefit offered by these plans.

 

Overall, a savings plan from trusted institutions, like Tata AIA life insurance company, comes with a critical illness benefit and gives you all the above advantages along with utmost flexibility in terms of premium payment frequency (single, annual, half-yearly, quarterly and monthly) and mode.

You can also choose to receive the benefit from your savings plan in the form of regular monthly or annual income or as a lump sum. The savings plan from TATA AIA also gives you the option to enhance your insurance cover through riders# and avail of all applicable tax-saving provisions under the law.

Make a smart investment for a bright and secure future!

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and they will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.

  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry

  • * Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility for tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisor.