Indianmoney Facebook Indianmoney twitter Indianmoney LinkedIn Indianmoney Google Plus Indianmoney Youtube Indianmoney Instagram Indianmoney Medium
 
 

" Your hard earned money slipping away?
Plan your taxes. "

Tax Planning

What is tax planning?

Is tax planning a last minute job for you? Are your budget and finances a mess because of this last minute tax planning?

Start your investments in tax saving instruments as early as possible and in a staggered manner (Small sums of money invested in tax saving instruments throughout the year) instead of a single one time investment at the last minute.

Tax planning tips

Buy life Insurance which matches your needs

You are newly married and soon plan to start your family. You plan to buy a life insurance policy to save on tax .Your insurance agent advises you to pick up an endowment life plan.

But should you pick up an endowment life plan? You are young in your career and most probably do not have much savings. If you die early your spouse or young children will not have much money to meet their expenses.

Why Tax Planning ?
Saves Your Salary

Saves Your Salary

Tax evasion is a crime. Tax avoidance isn't. Saves your salary by making using of tax deductions and exemptions.

Right Investments

Right Investments

Helps you make the right investment in financial products, based on your risk profile which save your income from tax.

Your Loan Saves Tax

Your Loan Saves Tax

Helps you save on tax by using the home loan you must avail, to buy your dream home or apartment.

Better Retirement

Better Retirement

Uses tax saving instruments to save your money and invests it in financial products, which ensure you have money for retirement.

Key factors to consider for Tax Planning

Should you buy an endowment life plan just to avail Section 80 C deductions on the premium paid up to INR 1.5 Lakhs?

An endowment life plan charges you a very high premium (Commission to be paid to the life insurance agent as well as charges for the policy).

An endowment life plan means

Insurance + Savings

This means you have to pay a very high premium on the endowment life plan.

The returns over a year are a meager 5-7%. Most of the premiums you pay are swallowed as charges for the plan.

If you purchase a term life insurance the premiums are low as it is a pure insurance policy. There is no survival benefit in the plan.

Simple : Pure insurance with a very low premium when you are young in age.

You need to invest in a term life insurance plan which has a low premium with a high sum assured which means that if you die young your family will get a huge sum of money to meet their living expenses.

Your insurance agent wants to pocket a high commission and will advise you to pick up an endowment life plan rather than a term life insurance plan.

Remember : Both life insurance plans (term or endowment) enjoy tax deductions up to INR 1.5 Lakhs under Section 80 C on the premiums paid.

Invest in tax saving instruments which match your risk profile

Your risk profile is very important when you make an investment in tax saving instruments. Remember both PPF and ELSS enjoy tax benefits under Section 80 C .

If you are a conservative investor (Want your principal invested to be safe and earn an interest on it) basically less returns at low risk you must invest in a PPF or a 5 year tax saver FD.

If you invest in an ELSS (Which has over 80% in equity) suitable for an aggressive investor then you risk losing money when the stock markets crash.

You might get a high return if stock markets rise but you face great risks and this means your investment does not match your risk profile.

Remember the lock in

Even if you pick up tax saving instruments which match your risk profile you need to check the lock in period of the investment.

A PPF has a lock in of 15 years whereas a NSC has a lock in of 5-10 years. A tax saver fixed deposit has a lock in of 5 years. You need to note the lock in period of your tax saving investments even if they match your risk profile as a lock in of 10 or 15 years means you cannot touch your money for that time period.

Related Articles

24 May 2018, Thursday

What 4 Years Of Modi Government Has Done To Your Finances?

  On May 26th 2018 it will be 4 years of Prime Minister Narendra Modi’s Government. What a 4 years it has been. Can you ever forget demonetization? In a surprise move, Prime Minister Narendra Modi demonetized high value currency on November 8th 2016. Within minutes the old 500 and...

22 May 2018, Tuesday

Catch Black Money And Be A Crorepathi

  Who doesn’t want to be a Crorepathi? Prime Minister Narendra Modi gives you a unique opportunity to earn Rs 5 Crores in just 6 months. Yes, a Crorepathi in no time at all. What must you do to earn Rs 5 Crores in just 6 months? Well, just help the income tax department catch black mon...

15 May 2018, Tuesday

6 Gifting Habits that Impact Your Tax!

  Gifts represent love, care and appreciation. They symbolize gratefulness and selflessness. When gifts have to do with sentiments and emotions, why does Tax come into the picture at all? Often, we gift just to save tax. We divert some portion of our income to friends and relatives. What ...

Most Read Articles

18 July 2012, Wednesday

How to Make Claim on a Life Insurance Policy?

Formalities for a health insurance claim You can make a claim under a Health insurance policy in two ways: On a Cashless basis and A Reimbursement Claim On a Cashless basis: For a claim on cashless basis, your treatment must be only at a network hospital of the Third Party...

14 March 2014, Friday

ELSS - Utilizing the power of compounding

As the name suggests ELSS invests the whole corpus in equities. Proportions as high as 80-90% of equities are found in an ELSS Fund. It is a special kind of mutual fund that qualifies for tax benefits. Basically Equity Linked Savings Scheme is a mutual fund with a lock in period of three years and...

07 January 2014, Tuesday

Why one must never neglect estate planning

One of the most common reason for family feuds in India as in the rest of the World is faulty estate planning. Estate planning is a neglected topic in India mainly because of the emotions attached to it. A common reason people neglect to make a will or indulge in estate planning in their younger yea...

Get It now!

How about our new look!

 
Great!
Mm.. Ok
Bad