Investment habits when inculcated early in your life can lead to a stress-free financial future. If you are beginning a new job, there a lot of things, you wish to do with your first income. However, juggling responsibilities and financial freedom can be a hefty task if not appropriately managed. After you start earning, one more thing that comes into the scenario is Income Tax. Every individual is liable to pay taxes on the income they earn. While paying taxes is necessary, there are certain ways in which you can reduce your tax liabilities. One such way is investing in tax saving instruments. These investments can vary depending on your future life goals as every one of them has a specific feature, it can be life cover, wealth creation, or even saving for your retirement.
Some particular types of instruments are:
Instruments to Protect your family and you
• Health Insurance: A health plan protects you from the expensive hospitalisation bills, in case of any unfortunate event. It is affordable and provides you with a tax rebate of Rs. 25,000 on the premiums paid under Section 80D. And if the policy is for your parents, then you can claim deductions up to Rs. 50,000.
• Term Insurance: A term plan protects your dependents in case something happened to you. After your death, a lump sum is provided to your family so, that they do not face any financial struggles. Moreover, by purchasing a term plan, you can claim tax benefits up to 1.5 Lakh under Section 80C.
Instruments for Wealth Creation
• ULIPs: ULIPs are investment instruments that provide the dual benefit of wealth creation as well as life cover. Moreover, with by investing in ULIPs, you can avail tax benefits up to Rs. 1.5 Lakh under Section 80C.
• ELSS: Equity Linked Savings Scheme, is a mutual fund investment scheme that invests your money in equity funds for higher returns on your investments. Furthermore, investments made in ELSS are subject to tax deductions up to Rs. 1.5 Lakhs under the Section 80C.
Instruments to Save for retirement
• PPF: Public provident fund or PPF is a savings scheme devised by the government that offers 7.6 percent interest on your sum. The interest provided on your sum is tax-free. Furthermore, you can avail tax benefits under Section 980C up to Rs. 1.5 Lakhs.
• Pension Plans: Being one of the best ways to get financial security after your retirement, the pension plan also provides you tax rebates. Under Section 80C, an individual can claim tax deductions up to Rs. 1.5 Lakh on the investments made in pension plans.