Taxes form a good part of your
total expenses, and anyway who likes to pay lot of taxes. But the truth is, our
government allows tax saving on certain investments to bring about the saving
habit. Especially for a longer horizon of three to five years or more.
Thus, there are taxsaving investments which you will be using to save tax this financial year.
Similarly, some of these investments also remain tax exempt even at maturity.
Thus, all investments are divided in the following three categories:
- ETT: Investment reduces tax but any accrued interest is taxed in future years including the gain at maturity.
- EET: These will offer tax reduction in the year you invest, any interest accrued in future is exempt but the maturity value is taxed.
- EEE: These are completely exempt investments, that is, your invested amount is exempt, interest accrued is exempt and maturity value is also exempt.
Most Tax Efficient Investments
Point to Remember: Deduction u/s 80C allows a maximum investment of
Rs. 1.5 Lakh. Therefore, maximum deduction you can claim is Rs. 1.5 Lakh by
investing in these instruments.
1. Term Life
Insurance: You are eligible to get tax benefits up to Rs 1.5 lakhs on the
premium of term life insurance policies under Section 80C.
2. Unit Linked
Insurance Plans (ULIPs) : If you
are looking for an equity market investment which also allows full tax
exemption, ULIPs are the products for you. Not only equity, but you can choose
the investment option depending on your risk profile, or simply choose a
life-stage investment.
Some
insurers like ICICI Prudential life offer life stage investment feature in
their ULIPs. This feature automatically switches your investments to safer instruments
as you approach maturity.
3. Guaranteed
Return Plans : Guaranteed
return plans are offered by life insurance companies in the form of an
Endowment or Money back policies. The minimum return on these plans is fixed
and guaranteed by the insurer, and upon investing a little more you can
participate in the growth of the insurer. Thus, on one hand your minimum return
is guaranteed, while your maximum return can go high.
Additionally,
these plans carry a life insurance cover for the investor. Thus, make a perfect
choice for long term goal investments, where you cannot afford to be underfunded.
4. Public Provident Fund: Public
Provident Fund is an attractive investment option for investors looking for a
safe return investment for long-term goal. Since the interest is decided each
year by the central government, the return on the investment varies. Yet, so
far it has stayed above 8% in the recent past. At a tax-free rate, this is far
better than five-year bank FDs which are ETT products.
5. Health
Insurance: You can claim a deduction on health insurance policies bought
for self, family, or parents in India. The deduction is Rs. 25,000 for self, spouse,
and children and Rs. 30,000 if a covered family member is a senior citizen. Similarly,
a deduction of Rs. 30,000 is given if parents are senior citizen and Rs. 25,000
in case parents are below the age of 60. Further,
preventive health checkup is tax-free up to Rs. 5000 within the existing limit.
Scenarios
|
Self, Spouse & Dependent Children
|
Parents (whether dependent or not)
|
Total deduction under Section 80D
|
All family members are below the age of 60
|
Rs. 25,000
|
Rs. 25,000
|
Rs. 50,000
|
Except parents, everyone is below the age of 60
|
Rs. 25,000
|
Rs. 30,000
|
Rs. 55,000
|
All family members are above 60 years of age
|
Rs. 30,000
|
Rs. 30,000
|
Rs. 60,000
|
If you are looking for the best
tax saving investment with option to invest in both equity and debt ULIPs may
be the best choice for you. Investing in ICICI Pru Life’s ULIP is now just a
few clicks away, visit ICICIPru Life’s website, fill in the details and start investing.
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