Smart financial management includes leveraging tax-advantaged investments. When you strategically invest in such options, it helps reduce your financial burden while building wealth over time. Here, insurance plans can be your pick as they offer impressive savings of up to ₹1.5 lakh under Section 80C, Income Tax Act 1961.
Beyond traditional insurance plans, several tax saving investments are worth exploring as potential investments. Are you aware of the alternative options available? Let us examine these term plan possibilities in greater detail and determine which may serve as one of the most advantageous tax-saving investments.
What Makes Term Insurance Tax Saving Investments?
Term life coverage is commonly linked solely to financial security. However, few selected plans deliver both risk protection and tax relief rewards. Here are a few plans where rewards overtake the risks:
- Tax-Saving Fixed Deposits
Tax saving investments qualify for deductions up to ₹1.5 lakhs a year u/s 80C of the Income Tax Act with terms and conditions. Their lock-in period is for 5 years and guarantees returns, making them perfect for risk-free investors.
- Public Provident Fund (PPF)
It is a 15-year investment plan with good interest rates. Contributions, as well as fund withdrawals under the PPF, are tax-exempt. For its contributions up to a maximum of 1.5 lakh rupees per year is exempt under section 80C of the Income Tax Act. If you want to avoid taxes on the interest at maturity, you must include it in your tax-saving plans.
- Unit Linked Insurance Plans (ULIPs)
A ULIP is a combined life and investment opportunity. To begin with, there is an inbuilt expectation for tax benefits. Under section 80C, the premiums of ₹1.5 lakhs a year are deductible from the taxable income. The withdrawals during the first 5 policy years are taxed because the policy’s invested term has not been exhausted.
- Equity Linked Savings Schemes (ELSS)
ELSS funds are those that are invested either in mutual funds, stock markets, equity, or any alternative. They are locked for a minimum of three years and offer returns better than regular fixed deposit tax-saving options. The tax benefit is set at ₹1.5 lakh per year under section 80C of the Income Tax Act.
- National Pension System (NPS)
Here is an investment scheme that yields returns and offers tax benefits on contributions and withdrawals alike. Under Section 80CCD (1) of the Income Tax Act, users who pay into NPS can benefit from a tax levy of a maximum of ₹1.5 lakhs annually. NPS matured amounts have a 60% tax-free allowance. Overall, this is one of the best tax-saving investments if you plan to retire from the corporate world early.
Factors to Consider When Choosing Tax-Saving Investments
Taxes might be inevitable, but choosing your investment options with tax benefits helps you build wealth seamlessly. Here are a few tips that will help you select one easily:
- Risk Profile: Before investing in tax-saving instruments, it’s important to assess your risk tolerance.
- Investment Limits: Consider your investment limits before finalising where to invest.
- Tax Implications: Understanding the taxes associated with each investment option is a crucial factor in deciding your best tax saving investment options.
Have You Picked Your Investment Option Yet?
Exploring various tax-saving options available in the market can help you find a suitable option. While considering them is essential, knowing the factors to find your best tax-saving investments is equally important. Therefore, you must buy them from a trusted insurance company.
Consider purchasing your investment plans from Canara HSBC Life Insurance. They have an extensive number of options with impressive returns ranging between 5% to 12%, apart from ELSS Mutual Funds.
Remember, strategic wealth building begins with informed decisions and disciplined investing. Explore the best tax saving investments that align with your objectives and aspirations from Canara HSBC Life Insurance today!