Every working man is familiar with three terms- earning, savings, and taxes. As the tax filing season approaches, people start getting worried. Especially for the people who have just started working, paying taxes can turn out to be an overwhelming experience since it gives them fewer opportunities to save some money. Is there any way you could save some money while paying taxes? Yes, there are a couple of ways to do that, namely expenses and investment. Your expenses such as tuition fees, rent, home loans, etc can lower your taxable income. Tax saving investment plans are another way of doing that. Here are a few investment plans you can choose to save tax.
Life insurance policy
A life insurance policy is an excellent way of providing a safety net for your family in case of your unfortunate absence. The premiums you pay towards a life insurance policy can be exempted from your income, thus reducing your taxable income and along with it, income tax.
Public Provident Fund
A Public Provident Fund or PPF is one of the most tax-efficient plans for salaried people. Not only are the payments made towards PPF eligible for a tax deduction, but the interest you earn from them is tax-free as well.
Term life insurance policy
Term insurance is the best life insurance policy when it comes to providing financial coverage and tax exemptions. This life insurance policy provides financial coverage to the beneficiary of the policyholder. Term life insurance policy offers deduction under section 80C of the Income Tax Act. And the death benefits received by the beneficiary are tax free as well.
This insurance policy provides a financial cushion to you in case of health troubles. Section 80D of the Income Tax Act allows you to avail tax exemption on the premiums paid towards one or more health insurance policies.
Employee provident fund
It is necessary for employers to deduct a certain percentage of their employees’ salaries and direct it to the Employee provident fund. These contributions towards the employee provident fund can be deducted from the total taxable income.
Unit linked insurance plans (ULIPs)
People prefer investing in Unit linked insurance plans because they offer you insurance cover as well as an investment opportunity. A certain part of your premium is directed towards investing in either stocks, bonds, or mutual funds. The premiums paid towards the ULIPs can be deducted from the taxable income. Also, the returns on maturity are exempted from the income tax under Section 10 (10D).
Equity linked savings scheme (ELSS)
ELSS is a kind of an equity mutual fund that invests a majority of the amount in equity or equity-related schemes. It has a mandatory lock in period of three years and is eligible for tax exemptions under Section 80C of the Income Tax Act. Wouldn’t it be nice to save some of your taxes while ensuring a safe and secure financial future for your loved ones? Investing in a life insurance policy helps you do just that. Invest in one at the earliest.