Karan ( 28) is like you and me, he enjoys good food, movies, and hates traffic. He also hates taxes like most of us. When his salary got to a point that where he knew that he was going to lose a major chunk of his pay in paying taxes, he started figuring out ways to save tax. He then asked his friends what to do. Some suggested that he should buy insurance. Others swore by 5-year fixed deposits. Karan wasn’t convinced because most of these were long-term commitments and decided to do some research (yes, this is unlike you and me!).
He realized that there were many ways to save tax. From tax saving fixed deposits to the money he was putting in his provident fund, national savings certificates and Life Insurance.
Life insurance is a critical part of any individual’s financial portfolio. It offers financial cover to the individual’s family in his absence. For this reason, the breadwinner must aim to take life insurance at the earliest for the family’s security.
Life insurance products came in various forms like endowment plans, term plans, unit-linked plans or ULIPs.
From a tax saving perspective, all insurance plans are â€˜equal’ before the law. So regardless of the life insurance plan, tax-saving is assured. The premiums paid on these policies help avail tax deduction and hence they are some of the important tax saving plans that one must be sure to consider. Not just that! Even the maturity amount is tax-exempted.
- Maximum deduction that can be claimed is Rs 1.5 lakhs
- Tax benefit under Section 80C*
- Tax-free proceeds on maturity/death under Section 10(D)
Karan concluded that tax saving Life insurance policies made the most sense. Today, many things frustrate Karan, but tax saving is not one of them.
He invested his money in a ULIP like Edelweiss Tokio Life – Wealth Plus which not only provided him an investment option but a life cover as well in case any unfortunate event occurs. He seems to be on his way to becoming a smart investor. Are you also a smart investor?