If you nonetheless have not produced your tax-saving connected investments for the existing monetary year – 2020-2021 – you need to hurry as the final date, i.e. 31st March, 2021, for filing investment proofs is just about the corner. Only final handful of days are left to make the final move and claim tax deduction below Section 80C and 80D of the Income Tax Act, by investing your income in numerous instruments such as Health Insurance, Term Life Insurance or other investment merchandise.
However, whilst investing in insurance coverage merchandise to save tax, persons need to have an understanding of that insurance coverage are substantially more than just tax-saving tools and need to be purchased with utmost precautions and understanding to avail maximum positive aspects at the time of want. To assist you, right here are some prominent tax-saving instruments that will apart from assisting you in saving tax will also provide you with sufficient monetary protection against unforeseen monetary emergencies. So, make your investments wisely!
Health Insurance – Section 80D
One of the most sought-right after approaches of saving tax whilst staying adequately and financially protected against planned and unplanned hospitalisation expenditures is acquiring a wellness insurance coverage strategy for you and your family members. As per the Section 80D of the Income Tax Act, 1961, the premiums that you spend against the wellness insurance coverage policy that covers you, your spouse, dependent youngsters and parents qualify for tax-rebate.
The maximum rebate that you can avail below Section 80D is Rs 1,00,000 that contains Rs 25,000 for wellness insurance coverage taken for self, spouse and dependent youngsters, and Rs 25,000 for wellness insurance coverage taken for parents. Moreover, if your parents are senior citizens i.e. above the age of 60 years, you can avail an extra tax-rebate of Rs 25,000 and if even you are a senior citizen, you can also avail an extra exemption of Rs 25,000. This brings your total tax rebate to Rs 1,00,000.
Life Insurance and Long Term Investment Products – Section 80C
Yet yet another prominent way of availing tax advantage below the Income Tax Act, 1961 is Section 80C which enables a maximum tax exemption of Rs 1,50,000. The premiums paid against numerous life insurance coverage and extended-term savings merchandise qualify for tax exemption. An exclusive advantage of investing in numerous merchandise that qualify for tax rebate below Section 80D is that the maturity quantity or the death advantage that dependents acquire on death of the life insured is also exempted from revenue tax. However, in order to avail the advantage, one need to know that the premium for policies bought ahead of April 1, 2012, need to not exceed 20% of the sum assured and premium for policies bought post April 1, 2012 need to not exceed 10% of the sum assured. Below are some of the preferred merchandise that are integrated below Section 80C.
Term Life Insurance
One of the most essential investment merchandise that need to be a element of your investment portfolio is term life insurance coverage. Under a term life insurance coverage, the life insured pays a fixed premium up to the coverage/policy duration against a defined sum assured. On death of the life insured inside the policy term, the dependents acquire the complete sum assured as lump sum payout. The premiums paid against the term strategy qualify for tax rebate, also the sum assured that the dependents acquire as payout is entirely tax-free of charge.
Guaranteed Return Products
A most current addition to the category is Guaranteed Return Products that guarantee you assured returns on the capital invested. These category of life insurance coverage merchandise offer you assured returns. Apart from supplying maximum returns, also have an in-constructed life protection element that guarantees that even if the policyholder dies, the dependents get the promised income. A assured return item provides you initial tax advantage, and tax-free of charge returns.
Unit Linked Insurance Plan (ULIP)
The new-age Unit Linked Insurance Plans are also a preferred selection amongst the investors hunting for tax-free of charge investments and returns. These merchandise come with a mandatory lock-in period of 5 years and can be purchased by the prospects for a tenure of 5, 10, 15, 20, 25 or 30 years based upon your demands and needs. These merchandise are ideal advised for persons who want to make a substantial corpus of one-time expenditures like child’s education or marriage and self-retirement.
(By Vaidyanathan Ramani, Head-Product & Innovations, Policybazaar.com)