The taxation system in India is complicated, and you need to make sure you have a thorough understanding of how it works. Tax planning is essential as it helps you reduce your total tax liability while maximizing your savings through systematic investments. These investments, in turn, provide the much-needed financial stability to you and your loved ones.
Below is a list of the best tax saving schemes available which you can leverage while planning taxes:
1 Life Insurance
The primary aim of life insurance is to provide financial security. Often regarded as one of the best tax saving plan options in India, life insurance policy goes a step forward to provide a variety of tax-saving benefits, while providing comprehensive protection to you and your family in any unexpected situation.
Overall, with life insurance plans, it is a win-win situation for the whole family – financial stability, along with maximal safety against life’s uncertainties and peace of mind.
2 Health Plans
Next, on the list is health plans. Health insurance premiums provide tax saving benefits under Section 80D. Based on you and your loved ones’ age, medical history, and other factors, you may avail of deductions ranging from Rs 25,000 to Rs 1 lakh in a given financial year. Therefore, choosing a health policy covering a wide variety of diseases makes is one of the best tax saving plan options in the country.
National Pension Scheme (NPS) comes under the jurisdiction of the Pension Fund Regulatory and Development Authority (PFRDA). Launched in 2014, NPS was initially intended for government employees. Later in 2009, however, it expanded to cover all residents in India.
Along with the available tax deduction of Rs1.5 lakh under Section 80C, you can avail of an additional deduction up to Rs. 50,000 under Parts 80CCD(1), 80CCD(2) and 80CCD(1B) of the Income Tax Act, towards the National Pension Scheme (NPS) contributions.
ELSS funds are open-ended, equity-oriented funds from which you will be able to invest your capital while still saving taxes. Being ‘open-ended’ means there is no limit on the number of units tradable. Around the same time, the word ‘equity-oriented’ means that they invest mainly in the shares/stocks of companies with diverse backgrounds.
Unit Linked Insurance Plan (ULIP) offers a combination of life insurance coverage and investment returns. Under a ULIP, the insurance provider allocates a portion of the premium invested towards different equity and debt instruments, while the remaining amount contributes towards provisioning the insurance coverage.
The premium payable towards ULIPs is eligible for tax deductions of up to Rs 1.5 lakh under Section 80C for a given financial year. Moreover, the death/maturity amount payable under the plan is tax-exempt under Section 10(10D).
6 Retirement plans
In retirement plans, you invest a small portion of your income into the chosen plan. The primary objective behind a retirement plan is to have a regular income post-retirement. Under Section 80C and 80CCC, contributions made to a retirement plan are tax-exempt up to a maximum ceiling of Rs 1.5 lakh.
One-third of the corpus allocated under the retirement fund is tax-exempt to the pensioner (immediately after reaching the retirement age). The remaining amount is assigned as an annuity and is subject to taxes at the time of death as per the applicable tax slabs.
7 Senior Citizen Saving Scheme (SCSS)
The objective behind the Senior Citizen Savings scheme – one of the best tax saving plan options in India, is to provide all individuals aged 60 years or above with significant tax savings along with modest returns. Under Section 80C, the investments made under SCSS are tax-deductible. Thus, when you invest in the Senior Citizen Saving Scheme, you may avail of tax deductions up to Rs. 1.5 lakh in a financial year.
8 National Savings Certificate (NSC)
The National Savings Certificate is a scheme of fixed revenue investment that you can access through every post office. NSC is essentially a savings bond that encourages subscribers – mainly low to mid-income investors – to invest while saving on income tax. Investments in the National Savings Certificate (NSC) of up to Rs.1.5 lakh provides you with a tax refund under Section 80C.
Tax-saving plans from reputable insurers such as Max life insurance will help provide long-term financial protection to your loved ones. At the same time, you can avail of sustained term insurance tax benefits throughout the policy period. You can choose from the best tax-saving schemes available based on your financial requirements and life goals.