The goal of tax planning is to arrange your financial affairs in a manner that it minimizes the impact of taxes. This should also play a major role in the financial planning and investment decisions to meet the long term financial needs of an individual. In a country like India where we do not have a social security, it is also important to secure the future of the family as a part of financial planning. With intent to promote savings the government provides various tax benefit schemes on different financial planning tools. It is extremely important for an individual to understand these benefits and align their long term financial needs in a manner which maximizes the tax benefits.
How to plan for tax savings.
Tax planning needs to be “planned” and have to be done with extreme care, after a detailed research and understanding of the options on offer. However, most taxpayers tend to defer this decision to March and then rush into putting their money into anything and everything with the sole objective of saving tax for the year. As a result, the returns are likely to be not commensurate to the amount invested and might not serve financial planning needs.It is therefore of utmost importance that one must do his planning in a timely manner with focus on products that can result in good returns as well as help in saving tax . Also, the product must be chosen based on their long term merits and in such a manner that multiple life goals can be fulfilled.
Tax planning opportunities-
Pension / Retirement Plans.
Most insurance companies offer pension plans which provide option to save when you are earning and thereafter receive pension/ annuity based on your future needs. One can avail benefit of up to Rs. 1.5 lakh on the premium paid towards a pension plan under Section 80CCC. On maturity, one-third of the maturity amount withdrawn is tax-free. Based on risk appetite, one can decide either for a unit-linked or a traditional plan and opt for pension after a defined time frame.
Life Insurance.
One of the most efficient tax planning tools is life insurance which provide financial security and good returns as well as offer tax saving benefits. There are a variety of products available and one can opt for them based on individual