Best Tax Saving Plan

Best Tax Saving Plan

Are ULIPs suitable for your investment requirements?

ULIPs in the current avatar are a far better bet compared to traditional plans for a variety of reasons. Let me list a few of them below and suggest why they may be suitable to a lot of people. I will also attempt to compare some of the features with traditional plans and hence the relative suitability for individuals.

·         Risk Appetite: If the person has ZERO risk appetite and is looking for low risk investments, then traditional plans are a better bet. Not that you will know the returns in advance but traditional plans do offer a certain amount of returns historically. Now if you are open to even low or moderate levels of risks, ULIPs are better as you can park your funds in debt funds and secure stable returns. If you see markets performing well you can move your money to more aggressive funds to reap the benefits.

·         ULIPs, like most life insurance products are long term products: ULIPs have a 5 year lock-in period while traditional life insurance plans have a lock-in period of 3 years. There is a positive catch in favour of ULIPs though in this. In case you decide to exit the policy after 5 years what your get in a ULIP will be far greater than what you get in a traditional plan. In traditional plans, you get back only a small portion of the premiums you have paid. In ULIPs you may even stand to make an investment gain if the markets have performed well.

·         Flexibility: Here is where ULIPs score far better than traditional plans. A little related to the point which I mentioned above in “flexibility”, with ULIPs you can decide where your money should be invested or go by the investment strategy of the company provided default option. In uncertain times you can stick to debt funds with low risk and move to growth oriented funds when you see the markets perform better. With a 10 year horizon, you will get enough opportunities to make these small adjustments and make money.

·         Surrender Charges: I wish to highlight this separately as we often find ourselves stuck with a plan and not having the resources to continue with it. The surrender charges will kill you in traditional plans, almost to the extent of banging your head against the wall! You will curse yourself if you buy a traditional Saving plans in a hurry to save tax or because you just felt obliged to the person selling you the plan. Later on when you cannot afford to pay the regular premiums, you stand to lose even the money which you have already invested. In traditional plans you will get only a small portion of the money you have invested in case you exit. With ULIPs, you may find surrender charges to be even zero after a few years. So you may be able to exit even with a profit!

·         Transparency: This is again where ULIPs score very heavily. You know exactly what charges have been levied and how you current account stands. With traditional plans, you know nothing – no information is shared with you. It’s a bit like receiving a bill from 2 hotels – one just mentions the high amount you are charged and the other offers a lower bill but has a complete split of all the charges. Since you now see the complete split of the bill, you tend to fret over the different charges not realising that they are much lower than what the other hotel has charged. But since the high bill amount had no splits you just shrug it off and pay the amount.

Overall, if a person has an investment horizon of 10 years, ULIPs are much better than traditional plans.

Save Tax & defeat the Tax Monster even at the 11th hour!!

Every year, the month of March springs a wakeup call on many of us. Suddenly, we are rushing at breakneck speed, going through financial papers, researching investment instruments, frantically calling the accountant—the deadline to file income tax returns is once again too close for comfort.

There are many reasons why we put off filing our tax returns each year—work, family pressure, and even sheer laziness. We are all wired to procrastinate; blame it on human nature. The point is this: Should we at all be procrastinating about something as crucial as our tax planning ?

Last-minute tax savings: Why it is a problem

Higher financial burden – Last-minute tax savers often have to scrimp during the last few months of the financial year because a bulk of their income is now directed into tax-saving instruments. The problem is compounded by the fact that the largest chunk of income tax is deducted during the final quarter of the financial year—i.e. from January to March.

Greater opportunity for error – Rushing is never a good idea, especially when your financial well-being is at stake. In the hurry to make good on the potential to save tax , you could make poor financial decisions and invest in unsuitable products. For example, a 25-year-old confirmed bachelor with no dependents has little need for life insurance, but he might buy a policy at the last minute in an attempt to save tax.

Dangers of mis-selling – When attempting tax savings at the 11th hour, many people consult agents and blindly take their advice. You should never take an agent’s sales pitch at face value because (a) there is the obvious danger of mis-selling by an unscrupulous agent and (b) even an honest agent may not be sufficiently aware of your financial condition. It is necessary to do your own research, which is not possible at the last minute.

Processing takes time – Note that buying a tax saving investment is not like buying groceries; there are procedures and it takes time. Furthermore, there may be unexpected delays for various reasons. Postpone your  tax planning until too late and you run the danger of missing your tax filing deadline.

Tax Monster

Tax planning: Why you should start early

Make good investments – You should ideally give yourself time to research tax-saving products so that you are certain of getting a good deal. Starting early also ensures that you benefit from the potentially higher rate of returns than your savings bank account would offer you.

Spread out the burden – If you start planning early, you can spread out the cost of making smart investments. Smart planning ensures that you do not have to adopt austerity measures as January comes around in a bid to do save as much tax as possible.

Look at the bigger picture – The longer you procrastinate, the greater the possibility that you will be looking at tax savings through blinkers: Your main goal will then be to Best Saving Plans in that particular year rather than on which tax-saving investment instruments benefit you over the long term. This really is the most important factor in favour of starting early, as it enables you to plan for your financial future in a better and more holistic way.

Top 5 Tax Saving Investment Plans

When Frank Sinatra sang ‘Fly me to the moon…’ he probably wasn’t thinking that we humans would actually make living on the moon possible. Although that plan is for a couple of years away, you could always start saving up to make it to the moon. Tax saving investment plans could just be the best way to help you get that moolah. Surprised?

Read on to find the top five tax saving investment plans that could get you to the moon, figuratively and literally.

Home Loan Principle:

You may wonder how a home loan can be an investment vehicle. A loan is a liability, but a home loan, being a financial assistance for an appreciating asset (like a real estate investment), the principal portion of a home loan repayment works as an investment.

The principal amount paid on any home loan can be used for availing tax benefits with a maximum deduction of Rs 1, 50,000 under Section 80C of the Income Tax Act. But before you get all set to avail the deduction, it is essential to know that this deduction is not available for any principal amount paid for a property under construction. The deduction is also available only for residential properties and not for commercial properties. The total deduction here is inclusive of all other financial instruments offering tax deductions under Section 80C.

Tax Saving Mutual Funds or ELSS: ELSS or Equity Linked Saving Scheme is one of the most popular tax saving instruments that offers handsome returns. ELSS is a diversified equity mutual fund that has a three year lock in period, which is the shortest amid all tax saving instruments. You can save up to Rs.1 lakh on tax under the ELSS scheme.

ELSS funds give returns ranging from 13% to 22% per annum, depending on the type of fund. The average returns of ELSS funds have been around 17.5%. You can join an ELSS fund with a minimum investment of Rs.500 a month as SIP. Any returns received from equity funds after one year are also tax free.

Tax Saving Fixed Deposits: Tax Saving Fixed Deposits allow you to save tax up to Rs.1 lakh under Section 80C of the Income Tax Act. However, the interest earned from these fixed deposits is taxable as per your income tax slab. Tax Saving Fixed Deposits come with a 5 year lock in period with an average return ranging from 8% to 9% per annum.

Banks do not offer any overdraft facility on these fixed deposit investments, unlike normal FDs. The interest for Best Saving Plans fixed deposits is generally compounded quarterly and gets reinvested into the fixed deposit along with the principal amount.

National Savings Certificates (NSC): National Savings Certificates are also tax free deposits allowing you to save up to Rs.1.5 lakhs under Section 80C of the Income Tax Act. Any deposits made under NSC, however, are not tax free as understood wrongly by many investors. But the interest earned can be re-invested to save tax under the same section.

NSC investments can be made at your nearest post office.  NSC investments come with options of a lock-in period for 5 years and 10 years. The rate of interest for investments made under NSC is fixed at 8.50% for five years and 8.8% for ten years. The minimum investment here can be as low as Rs.100.

Rajiv Gandhi Equity Saving Scheme (RGESS): Rajiv Gandhi Equity Saving Scheme (RGESS) offers tax savings up to 50% of the invested amount for the first year for a first time investor. So if you are a first time investor, you can claim a deduction of 50 percent of the invested amount subject to a maximum deduction of Rs. 50,000. However, the deduction can be claimed by only those who have an annual income below 10 lakhs.

The attraction of RGESS is that the deduction offered under it is applicable for money over and above the Rs. 1.5 Lakhs limit available under Section 80C. This scheme has reported returns of about 9.6% during the last financial year.

Source: https://blog.bankbazaar.com/top-5-tax-saving-investment-plans/

Build your castle of happiness with savings plan

Simple living and high standard of thinking is the mantra for success. But due to the ever improving lifestyle pattern, increased competition, high inflation costs simple living has become of a myth in life. Today, people are constantly striving to earn money to match the pace of lifestyle, create a big bank balance for themselves & family and secure their future. However, have you ever wondered will the handful of money that you save in your job or business will help you build a castle of happiness? NO. For this you need to have an out-of-the-box planning, possibly a savings plan that will help you create the desired funds to fulfill you and your family needs time-to-time and build sufficient corpus for future if anything unfortunate happens to you in life. 

Savings insurance plans are the modern day investment tools that help beat inflation costs and build a large corpus. Savings plan offers an insurance cover on your life and additionally helps you grow and develop an adequate amount of wealth through market linked investments. They help you save systematically and provide you different options to invest your savings in funds, on the basis of your risk appetite. The life cover promises the sum assured in case of the insured person sudden demise.

Today, there are various insurance companies in India that provide customized plan for their customers that will fulfill their requirement and most importantly fit into their budget. These plans should be selected keeping in mind three main goals:

Risk Profile- While young you’re free of responsibilities, liabilities and tension so you’re willing to take financial risks, therefore adopt a savings plan that can invest a part of your corpus in risk based funds. You can experiment the funds and produce the requisite savings over a period of time. 

Investment Period - Insurance plans offer a mid-to-long term investment horizon. So carefully choose your funds that can last the investment period and help you provide with better results. ULIP savings are very good long term instruments.

Final Goal – It is crucial to sketch out the purpose of your investments, whether it’s your child education or marriage or retirement, or some other goal.

The article discusses some points that will help you create an efficient savings plan of your choice:

Returns time

It is important to sit and understand whether your goals are short term or long term. This way you can decide where you can pool your money in. These could be risk based funds, debt funds or balanced funds.

Risk Appetite

Understanding your risk appetite is very important. Never set a premium higher than your monthly income source. If you skip a premium, then your policy would be likely to get lapsed. If you prefer safe investment take a look at bonds or securities.

Investment pattern

You have to strategist a plan whether you want to invest a big amount one time or small portion regularly. Invest in risk based funds or debt funds. It is advisable during your young days you can experiment in risk based funds and gradually start reserving your earning in debt funds for your ageing days.

Knowledge

Since these plans have market based earnings you need to have proper knowledge on the topic. Sit with your financial planner and discuss about present status of funds and future projection. For efficient result keep a periodic review (yearly) of your fund investments.

Savings plans not only provides growth to your money but also provide you with financial security at various stages of life. It depends on your needs to select the product size which suits you best. You must go through the scheme documents before taking up any investment scheme. Each financial plan has its own advantages and shortfalls, only a good research will save your hard earn money.

Tax saving Plans - A FEW TAX SAVING TIPS TO SAVE THE DAY

Tax Saving Plans

Buying Online Insurance is a Smart Choice

Today, internet is the buzz world where people can meet, shop, play games or find jobs. Also, Indian market is witnessing a ferocious development of e-commerce industry which is active with acquisitions and mergers. In fact, banking has taken the way of internet and so have the insurance companies in India.

From small steps with simple term plans, insurance sector is now exploring the online market for slightly complex endowment plans and other different policies with a combination of riders. If you spend more time on internet, then explore this medium to purchase insurance policy in India as well.

You will find ample information about insurance products at a simple search. Search and analyze these policies based on comparative data and reviews. Low cost is one of the biggest insurance policy benefits which insurance policyholder can avail only in online mode.

Buying online plans is a very easy process and simple to understand. Insurance service providers offer a range of facilities such as premium calculators, online comparison source along with various plans which buyers can select from.

It clearly means that purchasing online insurance policy in India is not just convenient but cost effective as well. Customers should keep in mind that they need to produce correct medical details and other related documents to make sure that the insurance company processes the insurance policy rider faster.

It helps for quick claim settlement which is more important for an insurance policyholder. The only offline part in this entire process is furnishing the results of medical tests.

Insurers have online helplines which can be approached for detailed information related to Best Saving Plans purchases makes it more cost effective and less time consuming. Customers can make well-researched decisions about purchasing a plan after giving the correct details and risk is reduced to a greater extent.