Tax saving is a crucial part of financial planning. An intelligent tax saving plan will serve you with a multi-objective of helping people meet their financial goals—the best saving plan results in a reduction of income withholding after filing an income tax return. Tax savings generally result from deductions, exemptions, and credits.
To save yourself from taxes to save an extra amount to meet your financial goals, you must consider various factors for better results. Below listed are some of the factors that you must look for while selecting the best saving plan.
Factors To Look For While Going For Any Tax Saving Investment Plan
The Amount of Tax You Need to Save
The first step is to check your tax liability which determines the amount of tax you need to save. The tax slabs are different for different income groups. You must estimate the tax liability to be sure how much you need to save.
What is Your Risk Appetite?
Some tax saving options, such as fixed deposit, PFF, and life insurance, carry lower risk, while others, such as equity-linked saving schemes, come with a higher risk. Thus, you need to assess your risk appetite and decide the risk level you can be comfortable with before choosing the best saving plan for yourself. The tax slab of different investment options varies differently.
What is your investment budget?
The investment budget is the amount you are willing to pay or the amount that your pocket allows. If you have a small amount for investing, go for the best saving plan that supports SIP, wherein you can invest an amount as low as Rs. 500 monthly.
Your Financial Goals
Tax-saving benefits should not be the only motive; you should link your investment with the financial goals. While you go for tax saving investment plans, always consider whether that plan fits your financial goals or targets. It is the best decision to go for the best saving plan that offers you tax benefits and lets you achieve short-term and long-term goals.
While you are willing to invest in the best saving plan that offers you tax savings, these are some important factors you must consider when choosing any plan. If taken care of, these are some factors that will lead you to the best decision for a tax-saving investment plan.
The Best Tax-Saving Investment Plans to Go For
A fixed deposit offers you a fixed return at the end of the tenure. The investors qualify for tax slabs of up to 1.5 lakhs per annum. Therefore, it is the best saving plan for low-risk investors with a medium investment horizon.
Health insurance covers medical expenses that are related to an illness, disease, or accident. It offers you financial support for hospitalization and other health-related expenses like surgery, daycare, medicines etc. Thus, health insurance is the best saving plan that offers tax deduction benefits as well.
Pension plans are the best tax-saving investment schemes that offer you a fixed income at the time of retirement and even after that. In addition, the premium paid for these plans is compatible with tax slabs of up to 1.5 lakhs per annum.
It is a life insurance plan that offers financial protection in case of any unfortunate event during the policy term. Moreover, the tax slabs offered to investors are up to 1.5 lakhs on the amount of premium paid.
A Unit-Linked Insurance Plan is undoubtedly the best saving plan that allows you to invest in multiple market-linked funds and grow your money for your financial goals. It also offers financial protection in case of any unfortunate event during the policy. This plan offers the dual advantage of money growth along with financial protection through insurance.
The insurance-based tax savings plans enable savings for long-term goals, such as buying a home, travelling, etc. Endowment plans offer fixed returns along with a life cover and are best suitable for decent savings at lower risk.
Tax-saving investment plans help you lower the tax payable amount and grow your money. Therefore choosing the best tax-tax saving investment plan for yourself is a crucial decision, and there are multiple options to choose from. Each plan comes with its own set of benefits and limitations and is customized to suit the needs of investors of different ages and risk appetites. In addition, the tax slabs differ for different income groups. You must consider this point while calculating the returns on your investment.
There are undoubtedly numerous best saving plans that you can explore and buy according to your budget. While choosing the above-mentioned plans, always consider the stocks that are booming main factors based on which you can make a wise decision.