Tax planning is an important part of financial planning and that’s why it should be properly analyzed before implementation. But most of the people keep tax planning in their waiting section of to do list and when the financial year is about to end, they will scramble to search the various ways of tax deduction and will end up in unfruitful investments. That’s why an early planning is necessary for choosing a better tax saving instrument which will allow you to meet your financial goals easily. When it comes to choosing the best tax saving instruments, then the decision is all based upon your need and situation, but knowing the various tax saving instrument is also very necessary so that you can choose the best one for yourself.
That’s why we have mentioned the 7 most effective tax saving instruments to cut your outgo
Table Content
- 1. Life Insurance
- 2. Health Insurance
- 3. ULIPs
- 4. Public Provident Fund (PPF)
- 5. New Pension Scheme (NPS)
- 6. Equity Linked Tax Saving Scheme (ELSS)
- 7. Tax Saving FDs
- Related posts:
1. Life Insurance
Life insurance acts as one of the most effective and secure tax saving instruments. The sole purpose of life insurance is to give financial security to the family of the policyholder in case of his absence, but in addition to the life cover, a life insurance policy offers you tax deductions also. According to section 80C, the premium paid towards buying or keeping a life insurance policy active is tax deductible and the maximum limit for tax deduction is 1.5 lakh, and according to section 10 (10D), the amount received in the form of death benefit is also tax deductible.
2. Health Insurance
Life insurance is not the only insurance product which gives you a tax benefit as a health insurance policy also offers you various ways of tax saving. According to section 80D of Income Tax Act, 1961, the premiums paid towards health insurance policy are tax deductible. Following are the different limit of the tax deduction under section 80D
| Person covered | Tax Limit |
|---|---|
| Self and Family | Rs.25,000 |
| Self and Family + Parents | Rs.25,000 + RS.25,000 |
| Self and Family+ Senior Citizen Parents | Rs.25,000 + Rs.30,000 |
| Self and Family (anyone of them is a senior citizen)+ Senior Citizen Parents | Rs.30,000 + Rs.30,000 |