A Detailed Look At The Tax Saving Schemes Available To You
There are people who try saving taxes through buying financial products at random before the financial year ends. This is carried out without any long term planning and may hurt the financial health at a long run. The process of tax planning should not be done in isolation. The larger investment needs to be aligned with tax saving instruments in order to maximise the returns. There are some ways that make the process of tax planning easier. The right option needs to be selected according to your own needs and situations in your financial life.
Getting insured is the first step towards tax planning for the future. There are a number insurance services institutions offer. Over the years the agents have been marketing insurance plans designed as tax saving schemes.
€ Life Insurance
Premiums for Life insurance policies that cover you, your spouse and dependent children are a great way save taxes. However for insurance policies that start from April 2012 and later, the premium has to be less than 10% of the sum insured if the person wants to claim tax deduction.
€ Health Insurance
The premium for insuring yours and your family's health provide your family health security as well as exempts you from paying taxes to some extent.
Apart from insurance policy options available to you, there are also certain wealth boosters that can make your funds grow faster as well as lower the tax burden.
€ RGESS
The government has now introduced tax incentives in order to encourage people to invest in shares and mutual funds. The first time equity investors who buy shares worth Rs.50000 within a financial year are now able to claim 50% deduction on the investment. However, this is applicable for those who have an annual income of 10 lakh or less.
€ ELSS
If you are not able to qualify for RGESS, that's when ELSS or Equity based mutual funds help you out. The lock-in-period available in equity linked saving schemes investments is 3 years. They do not attract capital gains tax.
€ ULIPS
The Unit-linked insurance plans are used to get insurance along with equity exposure. They are eligible for Rs1 Lakh deduction and the maturity proceeds are tax-free.
It is important to include your retirement plan as well while strategizing on your tax saving scheme. There are plenty options even if you are risk-averse and want to invest with the aim of building a fund for your sunset years.
€ Provident Funds
The Employers Provident Fund (EPF) requires the contribution from both, the employer as well as the employee. The contribution done by you is eligible for Rs1 Lakh.
€ Savings Certificates
The Five-year and 10-Year National Savings Certificates (NSCs) now offers 8.6% and 8.9% a year respectively. The investments are eligible for tax deduction but the interest earned is taxable.
€ Senior Citizens Savings
Senior Citizens (Above the Age of 60) are eligible to get 9.3% return under the Senior Citizen Savings Scheme. The Maturity period is of 5 years. One can open multiple accounts that do not exceed 15 lakh. The interest earned is payable.
€ National Pension System
Pension funds like National Pension System (NPS), unit-linked pension plans and mutual fund pension plans can also lower the tax liability for you.
It is an important task for everyone to reduce tax paying as much as possible. The above mentioned methods are a guideline towards tax reduction at every stage of our life. It is important to select the one which fits you and your family the best.
Getting insured is the first step towards tax planning for the future. There are a number insurance services institutions offer. Over the years the agents have been marketing insurance plans designed as tax saving schemes.
€ Life Insurance
Premiums for Life insurance policies that cover you, your spouse and dependent children are a great way save taxes. However for insurance policies that start from April 2012 and later, the premium has to be less than 10% of the sum insured if the person wants to claim tax deduction.
€ Health Insurance
The premium for insuring yours and your family's health provide your family health security as well as exempts you from paying taxes to some extent.
Apart from insurance policy options available to you, there are also certain wealth boosters that can make your funds grow faster as well as lower the tax burden.
€ RGESS
The government has now introduced tax incentives in order to encourage people to invest in shares and mutual funds. The first time equity investors who buy shares worth Rs.50000 within a financial year are now able to claim 50% deduction on the investment. However, this is applicable for those who have an annual income of 10 lakh or less.
€ ELSS
If you are not able to qualify for RGESS, that's when ELSS or Equity based mutual funds help you out. The lock-in-period available in equity linked saving schemes investments is 3 years. They do not attract capital gains tax.
€ ULIPS
The Unit-linked insurance plans are used to get insurance along with equity exposure. They are eligible for Rs1 Lakh deduction and the maturity proceeds are tax-free.
It is important to include your retirement plan as well while strategizing on your tax saving scheme. There are plenty options even if you are risk-averse and want to invest with the aim of building a fund for your sunset years.
€ Provident Funds
The Employers Provident Fund (EPF) requires the contribution from both, the employer as well as the employee. The contribution done by you is eligible for Rs1 Lakh.
€ Savings Certificates
The Five-year and 10-Year National Savings Certificates (NSCs) now offers 8.6% and 8.9% a year respectively. The investments are eligible for tax deduction but the interest earned is taxable.
€ Senior Citizens Savings
Senior Citizens (Above the Age of 60) are eligible to get 9.3% return under the Senior Citizen Savings Scheme. The Maturity period is of 5 years. One can open multiple accounts that do not exceed 15 lakh. The interest earned is payable.
€ National Pension System
Pension funds like National Pension System (NPS), unit-linked pension plans and mutual fund pension plans can also lower the tax liability for you.
It is an important task for everyone to reduce tax paying as much as possible. The above mentioned methods are a guideline towards tax reduction at every stage of our life. It is important to select the one which fits you and your family the best.
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