Everything You Need to Know About Tax Saving Plan

1
Everything You Need to Know About Tax Saving Plan
2

• People generally buy insurance plans simply out
  of the need to get financial coverage during
  emergencies rather than with the intention of
  investing their money. However, investment-linked
  insurance plans provide the dual advantage of
  investment and protection.
• As investment-instruments, life insurance plans
  not only help create wealth for the future but
  also offer tax benefits. That is, the premium
  paid by a policyholder in such Tax saving plans
  in India is eligible for deductions under section
  80C of the income tax act. While a part of the
  premium provides the policyholder with life
  cover, on the other hand, the remaining part is
  invested in specific investment funds the
  policyholder chooses viz. stocks, bonds and other
  assets. The funds will be managed by fund
  managers of the insurance company.

3
Why should you buy?

• Flexibility Such an insurance plan guarantees
  flexibility to the policyholders to choose their
  own level of protection and investment. Moreover
  it allows them to select the type of funds based
  on their risk aptitude and investment objectives.
  Not only this, but policyholders can also vary
  the amount of their premium payments or coverage
  depending on their personal financial conditions.
• Savings for retirement Investment-linked
  insurance plans serve the purpose of an ideal
  savings plan for those who want to remain
  financially secure in their retirement years.
  They ensure that the right amount of funds is
  available at the right time and allows one to
  maintain a good standard of living by taking care
  of unplanned expenses.

4

• Tax benefits With health insurance plans as the
  best Tax saving plans in India, an individual can
  hope to reduce net tax liability by reducing the
  computable tax base. The premiums paid on life
  insurance policies are eligible for tax
  deductions under section 80C premiums on pension
  policies are eligible for deductions under
  Section 80CCC - Section 80C and 80CCD(1) and
  premium son health insurance policies are
  eligible for deductions under Section 80D.
• Effective risk management Such insurance plans
  allow one to manage risks better and thus avoid
  getting locked into one fund. If a fund is not
  performing well, the policyholder can make a
  selection between equity and debt instruments.

5
What are the types of investment insurance plans?

• In terms of the manner of payment made for the
  policy, investment insurance plans are classified
  as
• Single premium-plan A single premium-plan
  basically involves the payment of a single
  lump-sum premium by the policyholder. Such a plan
  will rid the policyholder of worries about making
  regular premium payments or about lapsing.
• Regular-premium plan A regular-premium plan lets
  a policyholder make premium payment for the
  policy at regular intervals like monthly,
  quarterly, half-yearly or annually. Such a plan
  is beneficial if the policyholder does not wish
  to invest a large sum of money right at the start
  of the plan.

6
How to choose investment insurance plans?

• Listed below are some tips that will help
  potential investors and policy buyers in making
  the right choice when buying insurance plans
• Know your needs Policy buyers must clearly
  define the types of funds, the level of
  protection and the amount of money they wish to
  invest in any of the best Tax saving plans in
  India offered by insurance companies.
• Compare They should carefully assess the options
  and compare policies to pick the right plan with
  the right fund as per their specific
  requirements.
• Know your risk appetite They should be aware of
  their own risk appetite and must buy accordingly.
  
• Set your time period Potential buyers must
  decide on the time period they need to stay
  invested and build a corpus viz. 10 years, 15
  years or even longer.

7

• Choose payment modality Policy buyers must opt
  for the best payment modality depending on their
  capacity and personal preferences. Based on their
  present expenses, they can either choose to make
  annual investments with a lump-sum amount or
  regular payment of smaller premiums.
• Set your portfolio strategy It is important to
  understand how involved buyers wish to be in an
  investment and to know whether they would want to
  manage their fund on their own. Speaking to an
  expert helps in finding out the best portfolio
  strategy.
• Assess the market Policy buyers are advised to
  actively keep a track on the market situation,
  when focusing on their funds invested in
  investment insurance plans.