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Maximizing Tax Savings with Saving Insurance Plans

  2/21/23 8:43 AM

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Most people think of tax-saving as a complex process. Hence, they consistently delay their annual tax filing until the very last days. However, that is not a wise thing to do. In fact, with properly planned tax strategies, it is possible to significantly minimise the tax burden. Multiple tax-saving investment opportunities can help you save taxes.

The best option strategies for regular income that also help you save taxes are life insurance savings plan. These policies are specifically designed to offer regular income from investment throughout the policy tenure, along with insurance protection and tax benefits.

Tips For Last-Minute Tax Planning

For ITR (Income Tax Return), you need to make your investments between April 1 and March 31 of the particular financial year. But if you are late in your tax planning for the year, you can still choose investments like life insurance savings plans that give you long-term returns along with competitive features.

For last-minute tax planners, January to March are the most critical months for planning your tax-saving investments. Hence, you must plan your investments at least in January and February so that can be executed before the end of March. If you fail to make the tax-saving investments during this period, you will not be able to tap on their tax benefits in your ITR. Even if the ITR filing dates are extended beyond March 31, investments made later than this date cannot get you any tax advantages for the tax filing year.

That said, even though tax-planning in January and February will reduce your taxes, but the process can often lead to several mistakes and losses. When you delay your tax decisions until the last minute, you are more prone to make hasty decisions without taking a holistic view of your choices.

You might not have the time to consider the drawbacks of a specific investment tool and make an informed choice whether the investment is worth it or not. This can potentially increase your chances of suffering a loss in the long run. Moreover, last-minute planning will strain your finances and restrict you from spreading the investments. Hence, it is advisable to undertake efficient tax planning at the start of the year so that you make the right choices as per your needs.

What Are Life Insurance Savings Plans?

Life insurance savings plans are an attractive tax-saving investment option that can provide you with substantial tax advantages along with future financial security. Regular income insurance plans provide life insurance with returns. These policies provide life protection, along with long-term investment benefits. They help you build a strong corpus, create a regular income plan and secure the financial future of your family, even in your absence. These insurance savings plans also offer financial protection against critical or terminal illnesses.

Benefits of Purchasing Life Insurance Savings Plans

Life insurance savings plans offer the following benefits:

  • Long-term wealth creation
  • Financial security throughout your life
  • Guaranteed payouts to provide a regular income source
  • Tax-saving benefits as applicable under Section 80C of the Income Tax Act, 1961
  • Life insurance for your family keeping them secure even in your absence

How do life income insurance plans help in last-minute tax savings?

Time is short, but that does not mean you make a wrong investment choice. In this regard, a life insurance savings plan can never go wrong. Whether you invest early in the financial year or at the last-minute, the tax benefits will accrue in both cases.

Under Section 80C of the Income Tax Act, 1961, all premiums paid by a policyholder towards such life insurance savings plans are exempt from taxes up to Rs 1.5 lakhs. However, the premiums should be less than 10% of the sum assured. Further, all maturity and death benefits received under such plans are free from income tax under Section 10(10D). This is inclusive of any bonuses received against the policy.

A savings plan also allows you to pay your premiums in lump-sum or at regular intervals as per your desired frequency. So, if you are late in tax planning, you can still get the policy issued and pay a lump sum.

You also have the opportunity to enhance your coverage via five riders, namely Accidental Death Benefit Rider, Accidental Total and Permanent Disability Rider, Income Benefit Rider, Waiver of Income Rider, and Payor Waiver Benefit Rider.

 

Chirag Iyer - BFSI Enthusiast

Chirag is a writer and an avid reader who loves to drink coffee! His other interests include boxing, karate, and singing

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