If you are young, single, with no dependants, you have all the time to think about tax planning and related investments that help do so. Banks and financial advisors might have already started approaching you with their tax saving ideas. Basically, you have ample opportunities to gear your investment portfolio on the right track.
As the tax season approaches, we go haywire trying to figure out how to save up excess tax, through different investment options. Such times are really tricky; they pose a challenge for us to find the right instrument for tax savings. Remember, tax planning is a critical financial consideration, but need not be the only focus of any investment portfolio.
Importance of Tax Planning
Tax planning is one of the most integral aspects of personal finance. It is imperative for the reason that it helps you cut down on the amount of payable taxes and increase your savings. There is no denying that these savings can be utilized further for financial security in the future. We are entering that time of the year when most individuals rush to explore different tax saving avenues for the year through multiple investment options.
Investing a portion of your total savings in some securities is an ideal method of tax planning that provides you with tax benefits. Out of which Life Insurance is the most effective and preferred avenues of all the investments.Let’s have a detailed look over Life Insurance as an important tax saving instrument.
Life Insurance Policy – An important Tax saving instrument
Life insurance policy should always be given preference, especially when you have dependents. Although you have multiple options available for saving taxes, life insurance is definitely one of the most effective.Where Life Insurance aims to provide financial protection to its beneficiaries, in case of unforeseen events, tax-savings follows like an icing on the cake. Many a times, investors neglect the basic objective behind this investment and end up purchasing a wrong policy. Therefore, you need to take care while choosing the policies, as not all are entitled for tax exemption.
How much life insurance you need largely depends on factors such as regular income, expenses, financial obligations, and future goals like education, marriage etc. You can opt for a pure life insurance for high life insurance coverage. Here the premium is very minimal which serves the purpose of section 80C. The tax benefit is the advantage that comes along with this policy.
You can also get Tax benefits on Health Insurance products. Both the policies in combination can help you save overall on the net tax liability.Click here to read more about the tax benefits from life insurance policies.
The Tax exemptions provided on Life Insurance Policies are
About HDFC Life
HDFC Life (www.hdfclife.com), one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.
(Article was first published on 03.12.2012 and republished with amendments)