Tax Planning: Reduce Your Tax Burden by Opting for The Right Investment Plan

When it is the last quarter of the financial year, you would find people desperately looking for options to invest their money in. The idea behind investing the funds at that time of the year is to reduce the tax burden. Thisexercise by which an individual manages to legally save on taxes is called tax planning. However, to reduce your tax burden effectively, it is essential to choose the right investment plans.

Read more
investent plan
Plans starting from ₹1000/month
tata aia life insurance
Bajaj Allianz
hdfc life insurance
Best Investment Plans
  • money
    Generate wealth with high returns Earn 1 Cr in maturity with Zero LTCG tax
  • tax
    Double tax savings* On premiums (under 80C) and on maturity (under 10(10D))
  • compare
    Compare & choose the best 30+ Plans and 150+ Fund options

Past 10 Year annualised returns as on 01-06-2023

*Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply

Top performing plans with High Returns*

Invest ₹10K/month & Get ₹1 Crore returns*

We don’t spam
View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated
58.9 million
Registered Consumers
26.4 million

Since, we have about two months for the financial year to end; it is the right time to plan your tax if you haven’t done it yet. A good tax plan is one that not only reduces your tax outgo but also takes you a step closer to your financial goals.

Importance of tax planning

Tax planning is essential for attaining financial peace of mind, but, we think of tax planning only when we are impelled to present our investment proofs. It is then that we start exploring the best investment options available.

A well-planned investment can help save your hard earned money for future. However, this can only be achieved if we make an informed decision after evaluating all the available options, instead of zeroing-in on the easiest available option. Nobodywould want to buy multiple policies offering similar benefits when you have an array of available investment optionssuch as ULIPs, Senior Citizen Savings Schemes, EPFs, PO Deposits, PPFs, education loans repayment, home loans repayment, etc.

Additionally, effective tax planning also saves you up to Rs. 56,000(over Rs.1, 50,000 deductions available under Section 80C).Apart from investing in life insurance, FDs, SIPs, PF, under Section 80C, you can also invest up to Rs35000 in health insurance and claim tax benefits under section 80D.

When to start tax planning?

The earlier you start, the more you save; that’s how to go about tax planning.The best time for financial planning is the beginning of the financial year (April)Year end is not an ideal time to invest as most of us face cash flow constraints.

Therefore, the best time for investing is the beginning of the year. But, it is also a possibility that someone might not be able to invest at the beginning of the year due to some situations that might not have been under their control.

In such cases, when you are looking at last-minute options, you should invest in instruments that can be issued within the stipulated timeframe so that you can submit the proof of those investments in time and avail the tax benefits. The options that you invest in should add value to your financial portfolio and also help you avail maximum benefit.It is imperative for us to know about each of the instruments that fall under Section 80C, because most of the deductions that we all claim, falls under Section 80C.

How to save tax?

Remember, it is essential to evaluate all the available options in order to maximize tax saving.It is also recommended to seek some relevant information from the IT ACT (1961) (which is packed with information on tax paying and tax saving) before making a decision. We might be already aware of most of the tax saving avenues, but, some of them still continue to be unpopular.

Instruments available under Section 80 C and 80 D

Products available under Section 80C include Life Insurance, Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), Senior Citizens’ Saving Scheme (SCSS), New Pension Scheme (NPS), Bank Fixed Deposits and Traditional Pension Plans.

  • Life Insurance:Any amount you pay towards life insurance premium, for yourself or your family,is eligible for tax deductions. However, the minimum policy term is 5years. Also, the returns from these investments are not taxable.

  • Health Insurance:Under Section 80D, you can claim for tax deductions against your Health Insurancepremium or that of your spouse or children.  The deduction you can claim is up to Rs20000 for senior citizens and Rs15000 for others.

  • Unit Linked Insurance Plans (ULIPs): Unit Linked Insurance Plans offer the benefit of investments along with a life cover.The part of premiums left after deducting the cost of life cover is invested in debt and equity instruments.

  • Pension Plans: You can opt between Pension Plans offered by insurance companies and retirement schemes by mutual fund companies. Both of them give similar tax benefits, however, the amount you receive post retirement is taxable.

  • Public Provident Fund (PPF): Public Provident Fundadds value to your portfolio. Your contribution towards PPF earns tax-free interest at the rate of up to 8.7%. However, tax deductions under PPF schemes are available only if you contribute up to Rs.1lac.

  • Equity-linked Savings Schemes (ELSS): Investment in Equity-linked Savings Schemes scores full points on all parameters. Keeping the risk aside, the return on this investment is higher than the returns from any other option.Also, the lock-in period for this is the shortest (i.e. 3 years) amongstall the other tax saving investments.

  • Senior Citizens’ Saving Scheme (SCSS): Citizens over 60 years of age or those who are above 55 years and have opted for voluntary retirement can invest in Senior Citizens’ Saving Scheme. This scheme comes with a lock-in period of 5years and can be further extended by 3years. SCSS offers 9.2% returns; however, the interest earned is taxable.

  • New Pension Scheme (NPS): New Pension Scheme funds have managed to perform well in the past 5years. The return from E class funds are in line with those of NIFTY, corporate bonds and gilts have given double-digit returns. In addition to deduction under Section 80C, contributions made by an employer in a year on behalf of the employee are eligible for additional deductions under Section 80CCD. The only flipside to this is that the investment is locked-up until the investor turns 60.

Bank Fixed Deposits (FDs) and National Savings Certificates (NSC): Bank Fixed Deposits and National Savings Certificatesscore high on safety, cost and availability. You can choose to invest in these if you are comfortable with a 5yr lock-in period for better returns. However, this kind of investment is very liquid, which means, it can be used as collateral for raising loan at the time of need. The interest rates are comparatively higher vis-à-vis PPF and income is taxable.

Become a crorepati-1
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Invest more get more
capital guarantee
Investment Calculator
  • One time
  • Monthly
/ Year
Sensex has given 10% return from 2010 - 2020
You invest
You get
View plans

Investment plans articles

Recent Articles
Popular Articles
What is a Financial Planner?

31 May 2023

When it comes to managing your finances effectively and working
Read more
Sevarth Mahakosh

24 May 2023

Sevarth Mahakosh Portal is a one-stop solution for all state
Read more
PNB Senior Citizen Saving Scheme

24 May 2023

The PNB Senior Citizen Saving Scheme is a specialized savings
Read more
Pure Endowment Plan

24 May 2023

A pure endowment plan is a type of insurance policy that
Read more
How to Save 50 Lakhs in 5 Years?

18 May 2023

Saving 50 lakhs in 5 years may seem like a daunting task, but it
Read more
Best LIC Policies For Investment in 2023
LIC Policies for investment are the best option to invest your hard-earned money. As LIC is a government-backed
Read more
Best NRE Savings Accounts for NRIs in 2023
India is a growing economy and is getting a lot of global recognition these days. It has shown immense growth in
Read more
Post Office Monthly Income Scheme - MIS Interest Rate 2023
Post Office Monthly Income Scheme (POMIS) is an investment scheme of the Indian postal service. It promises the
Read more
Short Term Investments Options
Short-term investments can be described as temporary investments or marketable securities, which can be easily
Read more
How to Change Mobile Number in Post Office Account Online?
Indian Post Payment Bank (IPPB) is the banking division of the Department of Post (Ministry of Communications)
Read more

Download the Policybazaar app
to manage all your insurance needs.