Which is the Best Tax Saving Investments?

Whether you’re a salaried individual or a businessman, you’ll definitely agree that it is often painful to give a substantial part of your hard-earned money in taxes. It gets especially disappointing when a considerable amount of your salary goes into taxes due to unawareness about tax saving investments available at your disposal.

Tax saving remains one of the most sought after activities for anyone who is concerned about saving money. You’ll be surprised to know that there are various ways by which you can save taxes and also save a huge sum of money that will come in handy in the times of need. One such tax saving investment that provides you an optimal solution is life insurance.

Now, let’s discuss what all life insurance products can help you save sizeably on taxes and build a huge corpus to help you in the times of need.

So, let’s dive right in! Shall we?

Unit Linked Insurance Plans – Unit Linked Insurance Plans remain one of the best tax saving investments for anyone looking to save taxes. These amazing life insurance plans not only provide tax saving, but also help policy holders with huge savings and comprehensive life cover. With ULIP plans, you get to save taxes on the premiums that you pay to your insurer. In addition, you also get to save on the maturity proceeds that you get with these ULIP plans.

Listed below are the details of the tax exemption on Unit Linked Insurance Plans.

§  The maximum tax exemption allowed for ULIP plans is Rs. 1 lakh.

§  You can avail tax benefits on the premiums paid under section 80C of the Income Tax Act.

§  You would need to make premium payments by Cheque or Online transfer in order to avail income tax deductions on your premiums.

§  The minimum sum assured for getting tax exemption is 10 X the total premiums paid.

§  The proceeds of Death Benefits are completely tax exempt under Section 10(D) of Income Tax Act.

§  If you surrender the policy or if your policy is terminated within 5 years, the proceeds of tax deductions availed by you are liable to be added back to your income and taxed.

Pension Plans - Pension plans, commonly referred to as annuity plans, are yet another type of insurance plans that double up as tax saving investment for an individual. Pension plans work in an altogether different manner as compared to the ULIP plans. Typically, there are two different stages of a pension or an annuity plan. These are accumulation stage and the withdrawal stage. You can only avail tax benefit in the accumulation stage and not in the withdrawal stage.

Listed below are the details of the tax exemption on Pension or Annuity Plans.

§  The maximum tax exemption that you can claim with pension plans is Rs. 1 lakh.

§  You can avail tax deductions on the premiums that you under Section 80CCC of the Indian Income Tax Act.

§  You would need to make the premium payments through Cheque or Online transfer in order to get the tax exemption.

§  1/3rd of the maturity proceeds are liable for tax exemption, whereas the other 2/3rd of the maturity proceed is liable to be taxed.

§  Proceeds of death benefits are completely tax exempted.

Term Insurance Plans – The last on this list and perhaps the most popular type of tax saving investment amongst tax payers is Term Plan. As term plans do not offer anything on maturity, it is fairly easy to save taxes through term plans. Term Insurance ensures a comprehensive financial protection for the family of the policy holder and secures their future in case of the sudden demise of the policy holder. But what typically makes Term Insurance plans so popular tax saving investment is the fact that it is cheaper than almost all other insurance products.

Listed below are the details of the tax exemption on Term Plans.

§  The maximum tax exemption allowed with term insurance plans is Rs. 1 lakh.

§  Tax deductions can availed on the premiums under Section 80C of the Indian Income Tax Act 1961.

§  You would need to make the premium payments through Cheque or Online transfer in order to get the tax exemption.

§  Proceeds of death benefits are completely tax exempted under Section 10 (10) D.

In the End

In addition to these life insurance products, many other tax saving investment products are easily available at one’s disposal. You may choose to invest in National Saving Certificates, Senior Citizens Saving Scheme, Employee Provident Fund, Public Provident Fund, Tax Saving Fixed Deposits and much more.