The 2016-2017 financial year is coming to a close and most of us are rushing to get our investment documents in place. A lot of companies would have already started requesting their employees to submit proofs of their investment declarations. Either way, there’s little time to convert those declarations into real investments.
The smart thing to do would’ve been to invest systematically from the beginning of the financial year, in April last year. Making big, chunky investments to meet the declared amount is certainly going to burn a big hole in your pocket.
Additional Reading: Are You A Disciplined Investor?
But let’s not cry over spilt milk and use the little time we have to explore some of the best tax-saving options for you. Take this as a lesson and learn all about Systematic Investment Plans (SIP) to start investing smartly from the upcoming financial year.
Here are 5 great ideas:
Life Insurance is not an investment option per se (depending on the type of insurance that you opt for), but its helps protect your family in case of unforeseen mishaps. God forbid, should you kick the bucket, all hell will break loose on your family emotionally and financially.
A Life Insurance policy will provide your family immediate financial support in these difficult times as they work to get back on their feet again. All those Loan EMIs and bills will be taken care of with the insurance money. Additionally, by investing in a comprehensive Life Insurance Plan, you also get some relief from the burden of taxes.
The premiums you pay towards your Life Insurance Plan can be deducted from your taxable income, up to Rs. 1.5 lakh, under Section 80C of the Income Tax Act. This effectively lowers your taxable income while securing the future of your family as well.
What if you want to invest in a Unit-Linked Insurance Plan (ULIP)? Good news! That also qualifies for deduction under Section 80C of the Income Tax Act.
Benefits don’t stop at the premiums. The lump sum insurance money you’ll receive in case of any eventuality is also tax free under Section 10(10D). So go ahead and pay your first premium towards a Life Insurance Plan today.
Additional Reading: ULIP – Should You Consider Investing Or Not?
Health and fitness-related expenses cause a big strain on incomes today. If you get diagnosed with a critical or terminal illness, a Health Insurance Plan will float your boat when you are being flooded with hospital and medicine bills.
You might be hesitant to invest in a Health Insurance Plan because it doesn’t offer lucrative returns, but when you make your claims you’ll know that you did right by investing in one. Tax benefits? Yes, you get that too.
You can claim deductions of up to Rs. 25,000 on your Health Insurance Plan and Rs. 30,000 for senior citizens. This means if you take a Health Insurance Plan for yourself and your parents, who are senior citizens, you are eligible for a deduction of Rs. 55,000 on your taxable income.
People often buy riders on their Health Insurance Plan. If you’ve opted for a personal accident rider then the lump sum paid in case of a disability is tax free.
What about the group Health Insurance provided by your employer? Unfortunately, that doesn’t qualify for tax deductions.
Additional Reading: Should You Opt For The Terminal Illness Benefit?
- ELSS Mutual Funds
We totally dig ELSS as an investment option. It’s quite trendy, hip, and lucrative. Moreover, this investment option goes hand-in-hand with tax savings.
ELSS is a market-linked investment scheme. This means your money is invested in stocks. If you are fearful of dabbling in the stock market yourself, then this is the investment option for you. Remember though that anything to do with stock market comes with its fair share of risk. But high risks, albeit calculated ones, also means lucrative returns.
ELSS Mutual Funds have another lucrative feature. They have a short lock-in period of 3 years. Unlike a safe tax-saving Fixed Deposit, which offers mediocre returns, your money is not locked away for five years.
Moreover, when investing in a tax-saving FD, you have to keep the lump sum amount ready. This is not the case with ELSS Mutual Funds. You can invest in it following the Systematic Investment Plan (SIP) method. Investing money following the SIP method averages out the cost of investing, making it a pocket friendly way of getting rich.
Additional Reading: Everyone’s Going The SIP Way!
A popular pension scheme, NPS offers unique benefits that others investments don’t. Now you can make partial withdrawals from your NPS and get tax-free money on maturity when you invest in annuities. Under this scheme, your tax-savings are capped at Rs. 1.5 lakh under section 80C of the Income Tax Act.
Additional Reading: Why Investing In NPS Is A Good Idea
PPF is a central government designed savings scheme and by investing in it you are eligible for tax deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. Rs. 1.5 lakh is also the total amount you can invest in a PPF in a given year.
Moreover, this is a government scheme which makes your investment safe. And that’s not all – the returns earned on your PPF are tax free as well.
What about wealth tax? Exempted. But hold your horses before you go about investing in this scheme. There is a lock-in period of 15 years. Yeah, that long. This is definitely not the deal for you if you are looking at short-term investments.
A close relative of PPF is NSC. With similar features the difference lies in the fact that the returns on an NSC investment are taxed.
Additional Reading: PPF Vs NSC: Which One’s The Better Bet?
These are our top tax-saving investment options. While you decide which one to pick, do check out the many loan offerings on our website. Loans help you save tax as well, especially Home Loans or even Personal Loans, if the loan is taken to build or renovate your house.