5 Ways to Save Tax and Secure Your Family!

Introduction to Investment and Tax Saving

Every bread-earner in a family has one single aim: to secure his\her family member’s future and to give them better avenues in life when hit by crisis or in times of need. ‘Life’ is a very fragile thing, it cannot be safeguarded and is always prone to the perils of this world. However, you can always insure your life to help people under your sanctuary to be indemnified with a hedge-cover when you are gone.

Why is An Insurance Policy Better Than Bank Investment?

If you are looking to invest your money in your family’s future, it is best to invest in a life insurance policy which indemnifies your benefactor with a certain sum of money with a substantial return on investment.
Keeping money in a bank also earns interest, but does not promise you a specified sum of money like a policy does! Proper tax planning is the key here.

If you plan your tax deductions accordingly and invest in policies, not only are you exempt from certain taxes levied by the Government of India, you also end up earning more from your investment better than banking or investing in the share market, which is susceptible to market factors and burdens you with huge amounts of risk.

Proper tax planning aims to do two significant things:

  1. Reduce your taxes while you are still alive, and also after you die. A permanent life insurance cover gives you the advantage to hit these two targets with a single arrow!
  2. You can easily transfer your assets to your beneficiaries without the burden of income tax and also defer tax-deferred growth of cash kept inside the policy.

Here are 5 simple ways an insurance policy helps you secure your family’s future and gives you tax exemption from such investments:

Buy An Insurance Cover For All Your Family Members

An insurance cover helps cover financial losses as well as medical cover (medical insurance) in times of crises. Under Section 80D of the Income Tax Act, you can save up to INR 40,000 on health insurance policies with free preventive health care checkups.

Investment Of Your Money By Your Spouse In Tax-Free Schemes

If your spouse is unemployed and you have no more exemptions applicable under Section 80C of the Income Tax Act, you can still invest in insurance. All you have to do is to help make your spouse make an investment in any tax-free schemes that are popular nowadays since they carry no upper limit to investment and she can gift amounts from this sum to you without incurring any gift tax since you are in the beneficiaries list.

You can also provide similar sums to your parents with no levies in tax. The basic tax exemption limit for this tax-free scheme is INR 2lakh for parents aged up to 60 years, INR 2.5lakh for parents aged above 60 years age and INR 5lakh if your parents are aged above 80 years.

Loan Some Money To Your Spouse

If you make a payment to your spouse by specifying it as a loan; it becomes exempt from tax. Also, if you bought a house or transferred any second property in your spouse’s name, the rental income from that specific property will not be counted as an income (tax exemption) of yours if she agrees to pay you some stated amount as interest to that property.

Make Investments For Your Child’s Future

If you open an insurance Child plan policy for your minor you are exempt from taxation under Section 80C of Income Tax Act. You can also gift a sum of your money to your minor; be sure not to invest in any taxable schemes otherwise the interest will be levied in the name of the parent who has more assets. You can invest the money in a minor Public Provident Fund (PPF) account or invest in any credible mutual fund, but they will have a base limit of INR 2 lakh. Always invest in tax-free schemes to avail maximum benefit and cover for your child’s future.

Rent Payment To Your Parents\ Caretakers

If you are a salaried taxpayer and you live with your parents or under someone’s care, you have the option of paying the rent and claim tax exemption on the rent amount under your HRA (House Rent Allowance). This amount will save you from taxes, but will surely be added to their taxable income, however, we suggest a workaround for them, they can save the money being taxed by further investing their money into a tax-free plan of their own.

If the property is co-owned by both your parents, they should split the rent amount and file for separate tax liabilities of their own; this way the tax amount gets reduced.

It is always up to you how you look at the future; your money is in your hands and only you can judge what best can be done with it.

However, we at Easypolicy.com understand the ever-changing market economy and the benefits of allocating your funds at the right point in life to ensure notable income to your benefactors once they are old enough to receive the precious gift you have decided to earmark for their safety and well-being.

Partner with us to help us make you take better financial decisions!

The points enumerated points above not only help you dispense your income better, but also help you save huge amounts in taxes.

Remember, money saved today will come in handy tomorrow!