Nothing is certain in life except for death and taxes

— Benjamin Franklin

Taxation has a poor reputation around the world. We must add that there are good reasons for this. Many people fear taxes, while others wonder how to avoid them.

At Future Generali India Life Insurance, our approach is neither of these. In our view, taxes are to be celebrated! Thanks to tax-deductible investments. Here’s why:

  • You can build wealth for the future through tax-deductible investments.
  • Tax-deductible investments help in protecting your loved ones and yourself in case of unforeseen events.
  • Tax-deductible investments can help you pay off your debts, such as home loans and education loans.

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

12 lakh

Annual Income

12 lakh

NIL

Amount Invested in Tax-Saving Instruments

INR 12,500 per month

= 1.5 lakh per year

= 10.5 lakh Taxable Income

 

Tax on INR 12 lakhs

= INR 179400

Tax To-be Paid

Tax on INR 10.5 lakhs

= INR 12, 00,000 – 1,50,000
(Tax benefit u/s 80C)

= INR 132600

 

NIL

Tax Saved

INR 179400 – INR 132600 =

INR 46800

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 exemptions 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 under Section 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 ULIP Plan. 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.
  • 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
  • Comes with significant life coverage, to ensure a comfortable life for the family

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Don't wait until it is too late to invest in tax savings instruments. 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.