Of the total 3.98 crore non-corporate entities that should have filed tax returns for FY15-16, more than a crore didn’t make the deadline of August 5, according to figures published by India’s Central Board of Direct Taxes, Department of Revenue. Even those who did file their returns before the deadline, did so in just the nick of time.
This clearly shows that most of us leave financial planning for the eleventh hour. With most of us falling under the 10% or 20% slabs, we’d do almost anything to reduce our tax burden. So, we run helter-skelter, with the clock ticking against us, and invest in the first tax saving schemes that look good enough. We don’t have the time to set financial goals or to ensure that the investments we choose align well to our circumstances.
You’ve probably worked very hard to earn the money. It’s time you give a serious thought to your financial future and various tax saving plans that can actually prove to be worthwhile investments.
How to Increase Your Tax Benefits
There are a number of tax saving instruments that one can consider. While helping you reduce your taxable income, these policies can offer you a host of other benefits.
Life Insurance: Select a life insurance policy based on the cover you’re seeking for your loved ones. The premium you pay is eligible for tax deduction under Section 80C of the Income Tax Act, 1961. The tax deduction limit is up to ₹1.5 lakhs per year. Moreover, the proceeds paid by the insurer on maturity of the policy or the death cover received by your loved ones are tax free, under Section 10 (D).
Medical Insurance: According to Section 80D of the Income Tax Act, you can reduce your tax burden by an additional amount of up to ₹15,000 per year by taking a medical insurance policy. For senior citizens, this limit is as much as ₹20,000.
ULIP Plans: Instead of a pure life insurance plan, you may consider ULIPs, or Unit Linked Insurance Plans. These are insurance-cum-investment plans. This is a low-cost investment option that gives you a death cover and tax benefits.
Pension Plan: A taxpayer can claim a tax deduction of up to ₹1 lakh on the premium paid towards a pension plan or annuity plan. This tax saving plan falls under Section 10(D).
Tax saving schemes should not be seen merely as a way to lower taxable income. A combination of plans should be chosen depending on the returns and cover you desire for yourself and your loved ones.