Srikala Bhashyam is the Managing Partner of RS Consultants. She runs an investment consulting firm in Bangalore to provide consultancy in the areas of financial planning and media. In the last 15 years, she has worked with top publications in different locations. The primary focus of all her columns is to simplify the nuiances of Finance which has attained a new look over the years. Besides being a columinist, Srikala has also been closely associated with some of the prestigious book projects.
This tax planning season, the worry is not just relating to income tax. For many employees in the early stage of their career, income itself is a worry with the growing uncertainties on the career front. In fact, many of our clients are not sure whether they should make investments in tax planning when they are not sure of earning income in the coming year!
Traditional options like public provident fund or Insurance policies demand the investors to be consistent with their annual investments and hence may look less attractive.
For such professionals, making investments for tax planning may be meaningless. Having said that do not resort to the idea of non-investment by paying tax as the investment you make has the potential to generate returns whereas the tax you pay by not investing is expenditure. Hence, look for investments which don’t demand long term commitments with annual investments. Here are some of those options which can provide you tax relief with a single cheque.
Single premium insurance policies: While insurance is a long term commitment for securing life, insurance companies also provide single premium policies which does not require annual payout. This can be one of the options in the current environment as you can look at taking insurance cover without long term commitment. While we wouldn’t recommend it as a perfect tool, this can work to your advantage as the maturity amount of insurance plan is also tax free.
For instance, an investor can sign up for a single premium insurance product of Rs 40,000-50,000 with a term of 5-10 years. Another advantage with insurance plan is that the investor is not required to have a PAN card which is generally mandatory for other investment products.
A few companies have come up with single premium product but also offer market-linked returns. HDFC Standard Life is one of the companies that provides a maximum life cover of five times the premium amount besides providing exposure to equity. For instance, an investor can get a life cover of Rs 2.5 lakh with a single premium amount of Rs 50,000.
NSC is another product which is very easy to invest even if you think of your tax planning at the last minute. The product is sold through post offices and provides a guaranteed return of 8%.
Fixed deposit with tax saving: Bank deposits with a lock-in period of five years too provide tax benefit under Section 80C and again this can be a one-time transaction. With most banks allowing online investments, you need not even visit a branch though it may not be easy if you are a last minute tax saver. If you want immediate proof for your investment, walk into a bank which is giving good returns on its FD. The investment you make will take care of current year’s tax saving plan and you can look for a different option next year.
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