Taxercise for Fitness Financial Planning
In this modern society, people are putting more and more focus on their lifestyle. Workouts, walks, marathons, yoga and healthy foods continue to gain popularity. But while so much effort is given to physical health, what about financial health?
Financial planning is as important as health planning. One of the most critical aspects of investment planning is growing your wealth along with saving taxes.
Just like physical exercise, tax planning should not be a one-time activity. Let’s call this “TAXERCISE”! Taxercise is referred to a systematic way of making your investments, while maximizing your tax-saving and benefits at the same time.
Further, since it is called as Tax planning, you need to take stock of the situation and invest wisely throughout the-year. For instance, you are expecting a pay hike in the coming months. So, a more planned way to Taxercise would be to invest, while keeping your new income in mind.
How Life Insurance Helps You in Taxercise!
Various Life insurance plan offers life cover, sum assured on maturity and cash bonus, if matured. Interestingly, they also go a long way in saving taxes. However, not many people are aware of this. Most life insurance policies offer dual tax benefits. Typically, you get tax exemptions under sections 80(C) and 10(10D) with life insurance.
There is also section 80(D), which offers tax benefits in case of health-related plans. For instance, if you opt for a health insurance and/or a critical illness rider (with your insurance plan), you will get tax exemption under this section.
What are 80(C), 10(10D) and 80(D) of Income Tax Act, 1961?
- Section 80(C)
Premium paid towards a life insurance product help you save taxes under section 80(C). You can claim tax exemption of up to Rs. 1.5 lakhs per annum.
The benefit is applicable for you even if you take a policy for your parents, spouse or children.
- Section 10(10D)
With a life insurance, you can avail tax benefits on the pay-outs received. This pay-out could be the sum assured on maturity or even cash bonus.
In case of sum assured on death, your nominee can benefit from section 10(10D).
- Section 80(D)
If your insurance product is health-related, the premiums paid towards it offers tax benefits under section 80(D). This product could be a health insurance or even a health-related rider.
For instance, Edelweiss Tokio Life – CritiCare+ works by offering lumpsum pay-out on being diagnosed with listed critical illnesses.
Looking for Some Financial Tips? Taxercise Now!
Every time you opt for one of the above tax benefits, some weight is lifted off your tax burden. As a result, you move one step closer to financial fitness!
If you plan your taxes systematically, you will realize how cost-effective they are. In other words, Taxercising helps you manage your personal wealth. Most people moan and groan about taxes, but there are enough avenues to save them too!
So, the key is to stay aware and updated.
What to watch out for?
Not all insurance policies offer tax benefits. As a result, in a hurry, many people end up buying plans that do not offer such benefits!
In Budget 2014-15, it was stated that life insurance policies that are not eligible for tax exemption under Section 10(10D), will have 2% TDS deduction on the sum assured. In Budget 2016, the deduction was halved to 1%. Then again, in Budget 2019 5% deduction was proposed.
However, with us around, you have hardly anything to worry about!