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Tax

Post By Shraddha Gala

Salary above Rs 20,000? Get Smart with Tax Now

Indian citizens whose annual income exceeds Rs 2,50,000 (close to Rs 20,000 a month) are taxable. While filing tax is not optional for us, paying large sums as tax definitely is.

Tax saving is a delicate balancing act that involves smart, affordable investments and long-term vision. Nobody wants to make such a large investment for tax purposes that they then have very little liquidity left. And nobody wants to look for new tax-saving avenues every year either.

Having said that, tax saving is not as complicated as rocket science. The key is to strategize early and stay committed. Although 10 people will give you 10 different opinions on what the best tax-saving strategies are, the following points hold true for everyone, regardless of income, age, or socioeconomic status:

Tax-saving avenues have to be legal and have a valid paper trail
Slow and steady tax-saving investments (monthly) are better than lump sum investments
Invest in instruments that give tax exemptions in as many stages as possible; the stages are:
- Investment stage
- Accumulation stage
- Withdrawal stage

This article will introduce you to some best-in-class tax-saving investments that allow you to plan for a better tomorrow with smart, affordable investments today.

Investment Plans

Investment plans continue for a long time and allow you to save tax while you get rich slowly and steadily. Here are some categories of investment plans you could consider.

Child Plans

Child plans help you stay ahead of rising costs of education, your child’s marriage expenses, and many other major expenses. Major benefits:

Premiums paid come with tax benefits under Section 80(C)
Pay-outs you receive from child plans come with tax benefits under Section 10(10D)
These plans come in monthly premium payment modes
Flexibility to choose policy terms from 5 to 25 years
Flexibility to choose premium payment term that is convenient for you
Child plans are structured in such a way that they ensure continuity of investments
All pay-outs are guaranteed and not dependent on the performance of markets or investor sentiments
Significant death cover that allows the family to survive comfortably and the child to continue with education and fulfill aspirations and dreams

Retirement Plans

Retirement plans help you plan and save today so you can have a non-dependent, secure tomorrow with no lack of funds. Investing in retirement plans is one of the most crucial decisions you will take in your earning life. Here are some benefits:

Premiums paid come with tax benefits under Section 80(C)
Pay-outs you receive from retirement plans come with tax benefits under Section 10(10D)
These plans come in monthly premium payment modes
Flexibility to choose premium payment term that is convenient for you
Retirement plans are structured in such a way that they ensure continuity of investments
Small savings turn into a huge corpus by the time you retire due to the magic of compounding
Flexibility to choose between lump sum pay-outs, monthly pay-outs, or a combination of both

Term Plans

Term insurance is the simplest and the most cost-effective form of life insurance that provides financial protection to the family of the life insured in the event of his/her untimely death. A pre-determined amount is provided to the family to take care of their financial obligations, such as:

Outstanding loans, if any
Children’s education
Manage day-to-day expenses

This way, the family of the life insured remains financially protected even after his/her death. However, it is important to note that no benefit shall be paid if the life insured outlives the policy period.

Term plans have become one of the most popular forms of insurance today due to the very high cover provided for the relatively very low premiums. Term plan premiums come with Section 80(C) tax benefits, and pay-outs come with Section 10(10D) tax benefits.

ULIPs

Unit-linked insurance policies (ULIPs) are the perfect alternative to mutual funds. ULIPs give the same returns as mutual funds over the long run and come with many other amazing benefits:

Gains made in ULIPs are completely tax-free
Lower fund-management charges
Same returns as mutual funds
Hassle-free movement between debt and equity instruments
Significant life cover that allows the family to survive comfortably

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