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21 Dec, 18
21 Dec, 18

This tax saving season ? Make the right choice

Avinash was looking for some tax saving instruments. He was fast running out of time and he had hardly made any investments qualifying for a deduction under Section 80C. He made a hasty choice and submitted proof to his employer. After the deadline, he realized he made a hurried decision when his colleagues discussed the […]

By Qrius

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Avinash was looking for some tax saving instruments. He was fast running out of time and he had hardly made any investments qualifying for a deduction under Section 80C. He made a hasty choice and submitted proof to his employer. After the deadline, he realized he made a hurried decision when his colleagues discussed the various tax-saving instruments they have invested in.

Just like Avinash, for many people, tax-saving is a hasty process which begins in March as the deadline looms. These rushed investment decisions taken to save tax is not so much of a wise decision as the different options, their risks, and their benefits are not carefully analyzed.

What is the best way to invest?

The best way to invest in the right instrument that meets the needs of an investor is to start planning in advance. Instead of making a decision in March, it is better to start the due diligence process from December itself. This will help achieve the following:

  • Research investment options carefully
  • Estimate the correct amount to invest
  • Choose plans which give multiple benefits

Keeping aside the tax saving part, the primary reason for making investments is to provide a healthy corpus for different life goals such as retirement, child’s education, wedding expenses etc. Along with building a corpus, providing a safety net on these investments is necessary too. Hence, a plan which will combine your investment goals with tax benefits is an ideal choice.

The best way to use tax saving to the maximum benefit is to combine it with investment goals. A combination investment technique is to club investment and insurance together. An excellent option for that is a Unit Linked Insurance Plan (ULIP). ULIPS are a brilliant way of investing money for long term goals. These plans give growth plus protection. Also, tax can be saved on the entire amount invested. Many are not aware about the benefits and options available within a ULIP. Here, money gets invested in equity or debt funds plus there a life cover.

For example, ICICI Pru Smart Life is one excellent option available in the market. This offers all the benefits of a ULIP. Plus, in the unfortunate event of the policyholder’s death, ICICI Prudential Life will pay the sum assured to their nominee, and also, pay all the remaining premiums on the policyholder’s behalf till the time of maturity. On maturity, the fund value will be paid out to the nominee. In case the policyholder survives the policy term, the fund value on maturity will be paid out to meet the financial goals.

ULIPs are usually used to build a corpus over a long term period and also, for capital heavy goals such as children’s education expenses. Investing in one such plan right now will ensure that one stays a step ahead in fulfilling their long-term financial goals.

Some ULIPS offer additional benefits. For example, ICICI Pru Smart Life rewards its loyal customers in terms of loyalty additions and wealth boosters. These help build investments at a faster pace. It also offers liquidity and allows partial withdrawal after 5 years. This makes it easy to access funds in case of any emergencies.

The smartest way to make financial decisions is to make the investments which give multiple benefits and also, one which reduces tension. By investing in a ULIP, funds can be built, taxes can be saved and also, a safety net can be provided to the family.

Here is a quick snapshot of the various tax saving deductions available in the market and the instruments that can be selected for the same:

Whether salaried or self-employed, there are several options to save tax on the annual income.

Section 80C

This is the Holy Grail for most of the investors. This gives tax deductions up to a total of Rs.1.5 lakhs under various options. Some of the investments allowed under this are:

  • Life insurance
  • Public Provident Fund
  • Equity linked savings scheme
  • Tax saving fixed deposit
  • Sukanya Samriddhi Yojana
  • Senior Citizen Savings Scheme
  • National Savings Certificate

Section 80C also provides a deduction for home loan repaid, stamp duty and registration charges paid, tuition fees paid for children.

Section 80CCC

This provides a deduction for an investment made in an annuity plan. An annuity plan is one that will provide a monthly income post retirement.

Section 80CCD

This provides a deduction for any investment made in the National Pension Scheme. It can be done voluntarily or by the employer as a part of the salary structure.

Section 80D

Any investment in a Mediclaim or a health insurance policy for self, spouse, dependent children, and parents is allowed under this section.


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