New Delhi: The proverb that goes, “Early birds get the worm,” applies to investment planning as well. A well-thought-out financial plan not only ensures better returns in the future but also protects you from taxation.
In an exclusive interview with Zee News’ Reema Sharma, Head of Investments at Policybazaar.com, Vivek Jain stated, “The primary purpose of investing is to maximize savings, be financially covered, especially during distressing times, and create wealth.”
Because of this, it is preferable to act promptly rather than wait until the very last minute when making decisions that will save taxes. Insurance investments are one of the most sought-after ways to save money on taxes. Besides the fact that they ensure monetary security, yet in addition offer extraordinary tax reductions. “
Jain further adds that it is crucial for audit what is going on and assess your ventures to check whether you’ve found a way the legitimate ways to bring down your duty responsibility and furthermore the way forward.
He emphasizes the following guide to higher returns and tax savings with insurance-cumulative investment products.
Unit Linked Investment Plans (ULIP)
(Sections 80C and 10D) are a popular tax-free investment option that offer returns of up to 12 to 15 percent. A policyholder can claim a tax deduction of up to Rs. 10,000 to explain the benefits from the tax laws. 1,50,000 on the amount paid in ULIP policy premiums in accordance with Income Tax Act Section 80C.
For an annual premium of up to Rs 2.5 lakh, ULIP also provides tax benefits under Section 10(10D). This benefit is unique to the product and does not come with mutual funds or other similar investment options. The policyholder’s death-related payout to the nominee is also tax-free.
If you’re looking to invest for tax benefits, the Guaranteed Return Plan (Sections 80C and 10D) is another policy you should think about. The guaranteed return plans offer a high return rate of 6 to 7.2%, depending on terms and conditions, making them a worthy alternative to traditional plans like PPF, FD, and NSC.
In addition, because it comes with insurance benefits and a life insurance policy that covers 10 times the annual premium, it automatically qualifies for a tax rebate under Section 10(10)D. Additionally, because of the life insurance component, it is eligible for tax incentives under Section 80C up to Rs 1.5 lakh.
Health Insurance (Section 80D)
On the one hand, health insurance covers medical expenses incurred as a result of an illness; On the other hand, the policyholder may be eligible for a tax exemption under Section 80D of the Income Tax Act of 1961. It allows the policyholder to claim a tax rebate of up to Rs 25,000 per fiscal year for themselves, their spouse, and any children who are dependent on them.
In addition, the insured can claim a deduction of Rs 25,000 against the medical insurance premiums paid by parents who are not seniors, or Rs 50,000 if one or both of the parents are seniors. As a result, it represents a savings of Rs. Depending on the terms, you can get a tax deduction of $75,000 when you buy health insurance for yourself and your parents.
Term insurance (Sections 80C and 10D)
This seems to be a very common way to save money on taxes. Under Section 80C of the Income Tax Act, premiums paid toward a term life plan are eligible for tax benefits up to Rs 1.5 lakh. Not only that, but the benefits also extend to Section 10 (10D), which allows for a tax-free payout in the event of a policyholder’s death.
As its name suggests, term insurance is a pure life insurance policy that provides financial protection for the policyholder’s family. In the event that the policyholder passes away unexpectedly, the plan serves as a tool for financial protection. Thus, a term insurance policy aids in tax savings and provides a financial cushion.
Jain repeats that individuals ought to look over any of the abovementioned or buy a blend of strategies in view of their current monetary portfolio, as all proposition tax breaks that outcome in expanded abundance creation. He adds, however, that before making a final decision, it is essential to read the policies’ fine print.