How to Maximise Tax Benefits During COVID Pandemic?

The global coronavirus outbreak has drastically shattered the Indian market, with many investors losing their investment. The market may be down today, but will not remain the same for long. The current economic crisis is due to the global pandemic, which will change shortly.

We have seen people losing their lives during these challenging days, losing their jobs, and running out of balance. But those who have secured funds in different investment options are not much affected. If you are yet to invest in any investment plan for a better future, this is the right time to invest. One of the primary highlights of choosing the right investment options is that most of them come with tax benefits. Every taxpayer who is liable to pay income needs to submit a set of income tax documents to claim various tax benefits and deductions.

Tax Planning During Covid-19 With An Income Tax Calculator

Accept it or not, everyone prefers to spend less on tax payment, even if it’s a nominal amount. An effective tax planning during Covid-19 can bring in increased returns on your investment and added tax benefits with the help of investing in the right tax-saving assets.

For this, an income tax calculator can be of great help. An online income tax calculator is an easy-to-use tool to help you calculate taxes on taxable income using the Internet. These days, you can easily find an online income tax calculator to efficiently prepare tax planning and organize your financial statement for the current financial year.

An income tax calculator will show the net tax amount after deducting various investments and expenses as per the details entered. That being said, an income tax calculator helps in easy tax planning during challenging times of Covid-19 by helping you figure out how to save maximum on the taxes legally.

Since the online income tax calculator provides accurate results, you can plan to make short-term and long-term tax-saving investments. A tax saving investment is nothing but your decision to invest in financial avenues that offer tax deduction or exemption as per prevailing laws.

As a beginner investor, you should look for tax benefitting investments that provide the tax benefits and help earn tax-free income. If you want to invest in several tax saving investment options, then following are some of the choices available:

1. Life insurance
2. Health insurance
3. ULIPs
4. Child plans
5. Public Provident Fund (PPF)
6. Sukanya Samriddhi Yojana
7. National Pension Scheme
8. Senior Citizen Saving Scheme

Life insurance

One of the first few investment options that come to mind is life insurance for availing tax benefits. The premium paid on a life insurance plan can reduce tax liability under Section 80C of the Income Tax Act. Under a life insurance policy, the policyholder can claim a tax deduction of up to a maximum of Rs 1.50 lakh.

Health insurance

Apart from the tax deduction under Section 80C, a policyholder is entitled to get additional tax benefits in health insurance. You can gain tax benefits on the premium paid towards health insurance under Section 80D of the Income Tax Act.

ULIPs

Unit Linked Insurance Plan is yet another tax saving investment option preferred by many. It is a dual benefit investment plan that provides returns as well as coverage. The premium paid is divided into two portions – One part goes towards protective life insurance while the other part goes for investment in market-linked instruments. The premium paid in ULIP is also tax-deductible under the Income Tax Act 1961.

ELSS

Mutual funds are subject to market risks. Before you invest in mutual fund schemes, it is crucial to understand the existing taxation system. You can invest in tax saving mutual funds known as the ELSS – Equity Linked Savings Scheme that can maximize your returns and provides tax benefits.

Child plans

All child plans are eligible for tax exemptions. In case of the earning member’s death who was paying the child plan’s premium, a lump sum amount is paid and is entirely tax-free.

Public Provident Fund (PPF)

PPF account has a long lock-in period of fifteen years. Hence investing in PPF provides tax deductions under Section 80C of the Income Tax Act 1961.

Sukanya Samriddhi Yojana

Another popular and well-accepted tax saving investment plan is the Sukanya Samriddhi Yojana scheme, specifically meant for girl children. The investment made in Sukanya Samriddhi Yojana is eligible for tax deductions.

National Pension Scheme

NPS can also be an add-on to your retirement plan backed by the Government of India. The amount you invest in NPS is distributed to various other asset classes like equity, deposits, government securities, corporate bonds, and other asset classes.

Senior Citizen Saving Scheme

Investing in Senior Citizen Saving Scheme (SCSS) makes you eligible for tax deductions up to a limit of Rs 1.5 lakhs under Section 80C of the Income Tax Act.