Myth: Insurance alone help to save Tax
The Central Board of Direct Taxes – Ministry of Finance extended the deadline to August 31 from the earlier July 31st, for Income Tax returns on Individual (Order u/s. 119 of the Income Tax act, 1961). There is a time that the Individual Tax payers rush to the Insurance Company / Agent to get their Tax Benefits. I don’t want to criticize or against anyone here.
But the truth is why we have to rush to buy the Insurance policies urgently on behalf of Tax Saving. We are aware that our regular pay check (Salary) will rise by every year and the Bonus or any incentives where we getting. Without a proper financial planning, buying an insurance product is nothing but, putting our hard earned money in a garbage.
When we become a Tax Payer of a country, we can find the best way to get tax benefits. We thought that the Income tax is favored for the Corporate where we work for and the Government is involved in Tax Robbery. Most of us rely on the Insurance Products, just for Tax Saving.
It is a misconception that insurance coverage only helps with Income tax benefits. Insurance is a tool that helps us to protect our family from any unforeseen events. Yes, we can save tax with Insurance products. But we need to look the insurance plans offered by insurers as a protection feature, not look at them as a Investment or only for Tax Savings purpose.
If you are thinking the insurance as an investment, it will cost you more. As, we are saying that Insurance alone does not help you to save tax and make a better Financial Planning. Then, what are the other things to save tax efficiently ?
- U/s 80 C of Income Tax act – Life Insurance, Tax Saving Mutual Funds(ELSS), 5 Years Tax Savings Bank Deposits, Sukanya Samriddhi, National Savings Certificate(NSC), Provident Fund, VPF and Public Provident Fund(PPF), Kisan Vikas Patra, National Pension System(NPS), Rajiv Gandhi Equity Savings Scheme and more.
- Section 24 – Interest paid on Housing loan
- 80 D – Health Insurance, Medical Expenditure and Preventive Health Checkup.
- 80 DD & U – For Differently abled
- 80 DDB – Treatment on Specific Diseases
- 80 E – Interest on Educational Loan
- 80 EE – Additional deduction of Interest on Housing Loan
- 80 G – Donations and Relief Funds
- 80 GG – House rent Paid
- 80GGC – Donation to Political party
- 80 TTA – Interest rate on Bank savings
And there are more sections apart from the above to save Tax for Individuals. We can make Tax savings plans not just for Tax benefits, but also for an investment opportunity. An investment opportunity will help us increasing returns and save tax on a while. Buying Tax savings instruments in a last minute does not make sense. Try to start our Tax savings plan by the beginning of the Financial year and with Proper Financial Goals.
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