Best tax saving schemes to invest in 2021
United Linked Insurance Plan (ULIP)
ULIP has become the most popular tax-saving investment choice for its historically high returns. It is a diversified mutual fund that invests on equity, so there are some risks involved in this investment choice. However, the ULIP offers tax exemption up to a maximum of 1.5 Lakhs under section 80C of the Income Tax Act and provides the shortest lock-in period than any other tax savings investment, i.e., five years. It is the best saving scheme that can give potentially high returns on long-term investment along with the benefit of tax exemption.
Guaranteed Income Plans
The Guaranteed Income Plans offer a more flexible and customizable investment option for you that can prove helpful in accommodating all your current and future needs. It provides a decent return rate that can increase over the years depending on the market trends. The Guaranteed Income Plans offer tax exemption up to a maximum of 1.5 Lakhs under section 80C of the Income Tax Act. The policy term extends between 10-30 years, but the payout period starts immediately after the premium payments get completed. If you want the benefits of life insurance, tax-free maturity benefits, death benefits, and monthly tax-free income all in a single plan, then Guaranteed Income Plans are your best choice.
Life Insurance
Life Insurance is an essential insurance product and the best tax-savings investment choice for every individual. It can provide many tax benefits and financial security to the policyholder’s family in their absence. The life insurance offers tax exemption of up to a maximum of 1.5 Lakhs per annum under section 80C of the Income Tax Act, and the insured member’s income is tax-free if the life insurance premium is not more than 10% of the sum assured. Also, the maturity amount or the lump sum paid to the nominee of the insurance plan is tax-free under section 10D of the IT Act.
Term Insurance
Term Insurance is an excellent tax-savings investment plan that can provide financial protection and tax savings deposit to the family in case something unfortunate happens to the policyholder. The term insurance offers tax exemption of up to a maximum of 1.5 Lakhs under section 80C of the IT Act, and the sum received as a death benefit is also eligible for tax exemption. In addition, the TROP ( Term Insurance Plan with Return of Premium ) can provide the policyholder or nominee with a refund of the premium paid after maturity. This refund is also considered tax-free under section 10 (10D) of the IT Act.
Health Insurance
Health insurance is a tax savings scheme other than 80C in the IT Act that can deduct up to Rs.25,000 on the premium price as per section 80D. The tax exemption is an added bonus to the primary objective of getting cashless hospital transactions and health coverage.
No matter which tax savings investment plan you choose, there will undoubtedly be a tax benefit in any of the three factors- final matured amount, interest rate or initial amount limit (like up to 1.5 Lakhs). Hence, choose the best tax savings schemes to experience a reduced tax burden on your hard-earned income and expenses.
NOTE- Income Tax benefits/exemptions are as per the prevailing tax laws in India, which are subject to change from time to time. Please consult your tax advisor for further details.
