Nothing is certain in life except for death and taxes

— Benjamin Franklin

Taxes. Just hearing the word can make some people break out in a cold sweat. But why do
taxes evoke such a strong reaction, and why are they often seen as the enemy?

We At Future Generali India Life Insurance, believe celebrating taxes as a tool for collective
progress and societal well-being can lead to a more positive and constructive attitude
towards them. Taxes are to be celebrated! Thanks to tax-saving investments tools. Here’s why:

  • Regular contributions to tax-saving instruments instill financial discipline. This can lead to a healthier financial future and greater financial security.
  • Fosters long-term savings and wealth creation, as the invested amount grows over time with interest or returns.
  • Investments in insurance premiums not only offer tax benefits but also provide a safety net against unforeseen events.
  • These tools can help individuals achieve specific financial goals, such as funding a child's education, buying a home, or planning for retirement, while also benefiting from tax deductions.

For instance, below are 2 scenarios that will help us understand better. In scenario -1, a 30-year-old male does not plan his taxes properly, whereas in scenario -2 he does. Let's see what happens.

Scenario - 1   Scenario - 2

15 lakh

Annual Income

15 lakh

NIL

Amount Invested in Tax-Saving Instruments

INR 12,500 per month

= 1.5 lakh per year

= 13.5 lakh Taxable Income

 

Tax on INR 15 lakhs

= INR 1,45,600

Tax To-be Paid*

Tax on INR 13.5 lakhs

= INR 15, 00,000 – 1,50,000
(Tax benefit u/s 80C)

= INR 114,400

 

NIL

Tax Saved*

INR 145,600 – INR 114,400 =

INR 31,200

Assuming taxes computed for an Individual assessee for AY 25-26 as per old tax regime

To conclude, if tax planning is done wisely, taxes can be your best friend!

Tax Saving Instruments

Saving taxes is a fine-tuned act that requires smart and affordable investments as well as a long-term vision. It's important that you don't invest so much for tax purposes that you end up with little liquidity. 

Ideally, we encourage monthly tax-saving investments and instruments that offer tax benefits in as many stages of investment, accumulation, and withdrawal as possible. Investing in the following plan will allow you to save taxes for a long time while growing wealthy slowly and consistently.

Guaranteed Savings Plans – Debt Investments

Guaranteed savings plans help you plan and save today so you can fulfill important goals at different stages of life. Some of the major benefits of guaranteed plans include:

  • Tax benefits are available under Section 80C for premiums paid, please consult your tax advisor for more details.
  • Guaranteed plan payouts are tax-free subject to fulfilment of conditions prescribed u/s 10(10D), please consult your tax advisor for more details.
  • Flexible to choose the policy term as well as premium payment terms.
  • Avail guaranteed payouts.
  • A small amount of savings becomes a large sum of money by the time you need it, thanks to compounding.
  • Depending on the policy chosen, you get the option of choosing between lump-sum payouts, monthly payouts, or both.

ULIPs – Equity Investments

Unit-linked insurance policies (ULIPs) are excellent equity investments. Over the long run, ULIPs give the same return as equity investments, as well as offering many other amazing benefits, such as:

  • Section 10(10D) of Income Tax Act, 1961 provides an exemption for any sum received under a life insurance policy. However, with amendment coming from Finance Act 2021, no exemption shall be available for the ULIP’s issued on or after 01-02-2021, if the amount of premium payable for any of the previous year during the term of such policy/policies exceeds Rs. 2,50,000. In case if the premium is payable for more than one ULIP, if the aggregate amount of premium exceeds Rs. 2,50,000, then the amount received on maturity of each policy shall be taxable.Further, in the event of the policyholder's death, the death benefit continues to be tax-free under Section 10(10D).
  • ULIPs typically have a lock-in period of 5 years, encouraging long-term investment and financial discipline
  • Gains from ULIPs are tax-free
  • There is a low fund-management fee
  • The returns are the same as other equity investments
  • It is easy to switch between debt and equity.This can help optimize returns while managing risk.
  • Comes with dual benefit of insurance coverage and investment growth

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Don't wait until it is too late to invest in tax savings instruments.By leveraging these government-approved tax-saving options, one can effectively reduce their tax liability while securing financial future. Making smart, informed investment choices will turn taxes burden into a strategically. Connect with our financial advisor today, click here.

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Disclaimer:

It is advised to consult your tax consultant for proper tax planning.