saving taxes

Everyone wants to save taxes, but it is a tax easier said than done. While as citizens of a country it is our responsibility that we should pay taxes, however in order to reward its citizens the government often makes plans through which people can save a lot of money. If as an investor you are not making use of these plans then all the effort that you put in tracking the latest stock prices or the gold rate in Rourkela or Chandigarh will not give you the financial benefits you deserve. So let’s find out about the best investment plans that could help you save money.

  • Unit Linked Insurance Plan (ULIP)

The feature that makes ULIPs popular among investors is the tax-free income generated from this investment. In this plan, a part of the premium pays for the insurance cover, and the remaining amount is invested in debt and equity funds to generate returns. Upon maturity, the corpus can be withdrawn tax-free. The premiums paid and maturity proceeds from a ULIP are exempt from tax under Section 80C and 10(10D), respectively. Two additional benefits of ULIPs make it an attractive tax-saving instrument

To begin with, one can invest in a ULIP of as low as Rs 500 per month. This helps increase small savers’ chances of building wealth and protecting their families against any unfortunate circumstances.

In case of an eventuality, your family will get the sum assured plus the fund value. The proceeds are entirely tax-free under Section 10(10D) of the Income Tax Act, 1961.

Additionally, there is no lock-in period for ULIPs. You can withdraw your money after five years without attracting any tax liability.

  • Infrastructure Bonds

Another investment option that offers tax benefits is infrastructure bonds. While there is no limit on the amount you can invest in infrastructure bonds, your total tax deductions under Section 80C cannot exceed Rs 1 lakh. But if you purchase infrastructure bonds before July 31, 2013, you can avail of an additional deduction of Rs 20,000 under Section 80CCF of the Income Tax Act, 1961. Buying infrastructure bonds is as easy looking up gold rate in Chandrapur or any other city and then buying the gold online since you can buy infrastructure bonds online as well. Click here to learn more.

  • Pension Plans

Pension plans have been designed to meet your retirement goals; they are long-term savings plans with tax benefits. You can claim a deduction of up to Rs 1 lakh on premium paid towards a pension plan under Section 80C of the Income Tax Act 1961. Once you start receiving pension payouts post-retirement, they are fully taxable as per your applicable income tax slab rate. However, for long-term investments that have been held for more than three years, the returns are tax-free. Therefore, it is advisable to invest in a pension plan and claim tax deductions as early as possible to receive tax-free returns when you retire.

  • Term insurance

Term insurance is one of the most popular tax saving options today. With increasing awareness and availability of online term insurance, a majority of people are opting for this product.

Term insurance is a pure life cover that covers you only in case of death. You or your family will be paid a sum assured in case of your death during the policy term. In case you survive the policy term, nothing will be paid out to you or your family.

Term insurance can be purchased from various providers, including LIC, ICICI Prudential Life Insurance, SBI Life Insurance Company Limited and HDFC Standard Life Insurance Company Limited.


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