Do Not Buy Wrong Plans in a Hurry To Save Taxes

Save Taxes

Save TaxesAugust 31, 2015, is near. This is the last date to file your income tax return. This is the time when many people suddenly wake up to the fact, that only a few weeks are left to either invest or buy an insurance cover to save money on tax for the current financial year. Salaried individuals can invest in eligible investment products, buying an insurance product, use home loan principal payment aggregating to Rs 1 Lakh per annum, to save on taxes. The other options include buying a health insurance policy for self and aged parents. Investment in NPS through the employers and many more, that can make a person eligible to Save Taxes.


There are two types of people who search for Tax Savings during JFM months. One who just wants to save money on taxes.  The other ones are those who want to save tax, but also want to avail long term wealth creation opportunities which tax savings products offer.

Tax Planning should not only be part of JFM months. It should start in April. As one has to invest Rs. 30,000-40,000 to bridge the gap of Rs. 1 Lakh limit, domestic budgets should be stretched, but if you are being made to look at Tax Saving Schemes at this points of time, probably the better way is to look for tax saving options that can take care of tax planning for next two years i.e. 2016 – 2017.

Usually, people opt for availing Insurance Plan which is one of the most sold tax-saving products of this time. But before availing any insurance plan, one should analyze that if the insurance cover is required, or it is just being bought to save taxes. If the latter is true, then instead of buying an insurance plan, one should look for the investment products that can also generate wealth over a long period.

Some of the most popular plans for tax savings include:

  1.  Equity-linked savings schemes(ELSS)
  2. Provident Funds
  3. National Pension Scheme
  4. Term Insurance Plan
  5. Health Insurance

Equity Linked Saving Schemes from mutual funds, although they invest a large portion in stocks but are likely to accumulate higher returns. These funds invest at least 65% of their corpus in stocks in the Indian market and come with a lock-in a period of three years. In the case of provident funds like Public Provident Fund and EPF, there is approximately an assured return, which in the last few years been in the range of 8.5 – 9 percent per annum. IN NPS, there is no guaranteed return, but it brings the low cost and the professional fund management skills, a large number of advisors are advising these products to their clients.

There are people who commit mistakes when they are in a rush to invest or buy an insurance product to save on taxes during JFM months. Usually, they are offered the wrong product, which neither has relevance to their risk profile nor they help in meeting their financial goals. Also, a lack of knowledge makes them commit such mistakes. So it is always necessary to look out at the policy that you are opting for and choose the one that helps you save money.

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