Each individual has a different financial situation, hence following the herd may not be the best for your financial goals. Most of the tax payers invest in a hurry to save tax under section 80C, that too less than the maximum limit. This leads to higher tax payments, lower returns, liquidity crunch and unwanted cash outflow. For example, a 30 year old salaried individual having annual income of Rs. 12 lakh takes a life insurance policy (ULIP) for an annual premium of Rs 1.5 lakh for tax saving u/s 80C. His daughter goes to school next year and tuition fees payable would be Rs. 1 lakh which is also eligible for 80C deduction. Here comes the defect in financial plan because he pays policy premium as well as tuition fee totalling Rs. 2.5 lakh whereas tax benefit is limited to Rs 1.5 lakh. He should have chosen Provident Fund and term cover investment for Rs. 50,000 in addition to tuition fees of Rs. 1 lakh to optimize his investment u/s 80C. The additional Rs. 1 lakh saved from ULIP could have been invested in NPS under sections 80CCD(1) and (2) for retirement planning and tax benefits beyond 80C.
There are about 20 options under section 80C alone for claiming tax benefit including Jeevan Sukanya, a newly added investment for girl child. In simple words, look for tax saving options beyond 80C too and align to your financial goals and plan your goals for longer terms i.e. till retirement. For best solution, take expert help available at a fraction of your investment losses.
Here we bring you a checklist that ensures that you save a little extra with efficient tax planning as well as be a smart and informed taxpayer:
- Health is wealth – Invest in your health to enjoy your wealth
- Claim what is rightfully yours
- Income Tax Authorities know it all – report money from everywhere
- The Sooner the Better – File your return early
- If it’s exempt, why hide it?