Life is all about experiencing and realizing our wishes and dreams. It also is about trying to make those dreams and wishes come true. From buying a big house to sending off your children to Ivy League colleges, there are so many things that you want to become a reality. However, with your salary and savings, you often doubt if you’ll be able to make your ambitions come true. But, not to worry, we suggest you consider the money-multiplying potential of ‘Investments’ that allows investment for tax exemption.
So if you want to confirm your family’s security and leave behind a legacy, we recommend you make a smart investment plan. Various options for the ideas of investment for tax exemption that is available online, it can be confusing to pick the right plan. We are here to guide you into your journey towards selecting the right investment plan. Let us first understand the kinds of investments.
Long Term Investments Vs. Short Term Investments
To invest in an investment plan, first, make sure if you are looking for an investment that can give an early return or if you want to spend a lengthier period to get a return, and reap the benefits of investment for tax exemption.
Short term investments offer plans for a duration of one to three years. A few types of smart investment plans are:
- Debt-Based Mutual Funds
Debt-based mutual funds mainly invest in money market instruments like corporate bonds, government securities and provide a fixed return. These funds are tax-efficient substitutes for short term fixed deposits with banks and are famous with investors who are risk reluctant. Good performing debt funds offer a post-tax return of 7-8%, which makes it an ideal smart investment plan.
- Equity Linked Saving Scheme (ELSS)
ELSS is a kind of equity mutual fund that invests a minimum 80% of its total assets into equity and related instruments. It comes with a statutory lockdown period of 3 years and offers excellent returns to its investors. The added benefit of this scheme is that it enables you to make Investment for tax exemption under 80C of the Income Tax Act. A maximum of Rs. 1,50,000 is allowed as a tax exemption. Although the return on ELSS funds are subjected to long term capital gains tax at 10%, but profits upto Rs. 1 lakh per annum receives tax exemption. So, if you are looking for an Investment for tax exemption, ELSS is a great option.
- Health Insurance Plans
To take consideration of a health insurance policy when you are making investment plans is a smart decision. It helps maintain financial stability and also helps fulfill the requirements of medical emergencies. Under health insurance, you make an investment for tax exemption as it is a great instrument when it comes to saving annual income tax. Under section 80 C of the Income Tax Act, during your policy term, you can claim your expenses for preventive health checkups. It also gives you the benefit of a tax investment exemption upto Rs. 25,000 each year. In case, if your age is 60 years or above, then section 80 D allows for a waiver of upto Rs. 30,000.
Long term smart investment plans use the power of compound interest and fetch you higher returns for your investment over the chosen period of your policy. The best investment plan for tax saving under long term investments are:
- Public Provident Fund (PPF)
It is a long-term tax-free instrument of saving that encourages small regular savings and is backed by the government, which makes it an extremely safe option. PPF invests your money for a fixed period and earns you a return on your savings. Completely safe and accessible, it provides 8% interest rates since 1st October 2018. Public Provident plans are considered to be one of the best investment for tax exemption.
- Equity-Based Mutual Funds
Equity-based mutual funds offer diverse investments and give you the option to invest in a pure debt, equity or a hybrid fund. Collected funds from different investors are invested in a company’s bond or shares, which is managed by a professional fund manager. If you wish to opt for equity-based mutual funds, your safest bet would be to invest in index funds. In the case of debt funds, you can invest in gilt funds as they are reliable.
- Term Plans
Term plans offer assured life covers at a reasonable premium. It is a necessary tool to provide your family with the assurance of financial security after you pass away. It is the preferred choice of policyholders looking at investment for tax exemption. The premium paid has a tax exemption up to a limit of 1.5 lakh under section 80 C, and the death benefit is fully exempt under section 10 (10 D). These laws also state that any policy issued on or after April 1, 2012, get a maximum tax exemption limited to 10% of the sum assured. In case the premium paid exceeds by 20%, then tax will be levied on the death benefit. In case of term plans, before going for investment for tax exemption, make sure you check the premium percentage and don’t lose out on tax investment benefits.
Go For A Smart Investment Plan
Now you know about the different options available in the market, build yourself a sound investment portfolio. Trusted and reputable insurers like Max Life Insurance provides varieties of smart investment plans and lets you choose investment for tax exemption. While you are at it, also look for tax investment plans as this will enable you to save more money for yourself and your family. Start investing now!