As a responsible citizen of India, you must pay your taxes on time because it helps the government build the country’s infrastructure.
Did you know that with the help of tax planning, you can not only make your contribution to the government but also legally save taxes from expanding your paycheck and investments? It doesn’t matter in which income bracket you fall; there is a portfolio of best tax saving investments for you out there that you can use to leverage tax deductions and exemptions to pay less income tax.
Income tax investment is often viewed as a way to save tax. However, it helps you meet two purposes. Firstly, you can save money by paying fewer taxes. Secondly, you can grow your wealth and safeguard your family’s financial health by staying invested in your best tax-saving investments portfolio.
It is that after-tax money that you will be spending to pay for your day-to-day expenditures and save for retirement. If you want to maximize the returns, then you need more money and keep your investing more tax-efficient.
The best way to do it is by putting your investments in the right tax-saving product.To help, here are some tips to help you develop the best tax-saving investments for you and your family.
- Start Early, Don’t Wait for the Year to End
In case of investments, it is always better to start planning your taxes early and not wait until the end of each year like most people. Doing so will take away the time advantage, and you will end up making wrong investments just to save taxes. However, if you do this at the beginning of the year, you can review your choices carefully and build your portfolio of income tax investment by carefully assessing each product. Moreover, starting early also imparts financial discipline that will help you organize your finances in a better way.
If you are a first-time investor, the best product to start for you is a term insurance plan. This no-risk life insurance product is designed to protect your family’s financial future against life’s eventualities, such as the breadwinner’s sudden demise. As you grow comfortable with the concept of investing, you can then move on to other wealth-creation investment options such as Unit Linked Insurance Plans and Equity Linked Savings Scheme.
- Invest in Variety of Tax Saving Instruments
Besides, financial advisors recommend that placing all your eggs in one basket is never a smart idea. Each investment instrument has its benefits and returns. Therefore, you must spread your money across various asset classes to balance the risk and return. This is called diversifying your income tax investment portfolio. This strategy can help you smoothen your returns and help you achieve growth while reducing the overall risk from your portfolio.
- Prioritize Life Insurance
Life insurance is a must-have in your financial portfolio because it ensures financial support and a comfortable life for your loved ones. The benefits that come with life insurance help your family build a safe future, even if something happens to you. Moreover, you can also avail of significant income tax benefits of up to Rs. 1.5 Lakh under Section 80C. At the same time, section 10 (10D) of the income tax makes the maturity benefit tax free.
Remember that life insurance instruments are also some of the best tax-saving investments. To get the best term insurance policy for tax-saving purposes, therefore, you should compare different plans online before investing. Online term plans offered by trusted insurance providers such as Max Life Insurance enable you to choose wisely by allowing you to compare, review, and select policies as per maximum benefits and cost-effective premiums. There is a wide range of online term plans that you can select as per your family’s needs and lifestyle requirements.
- Exhaust your Tax Deductions Available Under Section 80C
The best way to start planning your income tax investment is to see how to claim tax deductions under Section 80C. Instruments like Employee Provident Fund and life insurance policies are standard amongst investors that can save you tax. Deduct that amount from Rs. 1.5 Lakh to see how much more you need to invest in exhausting the limit. Once you know the number, you can reverse engineer the process to choose the right investment Plan for yourself.
You can look at the following instruments eligible for tax deduction under section 80C:
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- Equity Linked Savings Scheme (ELSS)
- Life Insurance Premium
- National Savings Certificate (NSC)
- 5-year tax-saving Fixed deposit
- Tuition fees of children
Now that you know how to create the best tax-saving investment portfolio, it is time to start planning it now rather than wait for the end of the financial year.