Have you ever tried to understand your payslip in detail?If not, then perhaps you didn’t know that your employer is deducting up to Rs. 2,500 every month as professional tax deduction every month as per Article 276(2) of the Indian Constitution, among other deductions.
Typically, Professional tax deduction is just one of the many deductions that make up your Cost to Company (CTC) along with other elements such as House Rent Allowance, Leave Travel Allowance, and more. Understanding your salary and its composition is the key to planning your tax saving investment sunder the existing Indian tax system while increasing your disposable income and fulfilling your life’s financial goals.
Planning your finances is the name of the game when it comes to tax saving investments. To benefit from various deductions and exemptions, you need to dissect your payslip and work towards building a corpus of tax saving instruments that can help you save money and also build financial wealth over a period.
Choosing the right tax-saving investments is instrumental in saving taxes under the prevalent Indian tax system and also ensuring that you understand the necessary components, such as professional tax deduction, that make up your in-hand salary.
If you want to be prepared for every significant milestone and eventuality in your life, then you need to start planning your tax saving investments right now!
Here are some of the instruments that will help give you a head start.
- Health Insurance with CI cover
Unhealthy lifestyles and stressful conditions have made lifestyle disorders a reality. Did you know that approximately 40 percent of all heart patients in India age between 25-35 years?
Knowing about life’s uncertainties and possibilities such as these will help you prepare for such risks with the right tax saving instruments. For instance, health insurance is a must-have because it protects you in case of such eventualities and pays for hefty medical bills so that you can recover with ease, without pressuring your family to pay for your illness.
Supplementing your health insurance with a critical cover will not only pay for you a fixed lump sum, as mentioned in your policy document, but do so as soon as your diagnosed. This money can be used to pay for your household expenses, tests, treatments, and medication. The most standard ailments covered by critical illness cover include stroke, kidney failure, cancer, paralysis, and more such life-threatening diseases.
Health insurance with critical illness cover is not the same as your regular health insurance. Critical Illness cover will pay for your treatment, regardless of where it takes place. A lump sum benefit is paid on the diagnosis and helps you get through all the related and unrelated expenses. Additionally, don’t forget that it also qualifies as a tax-free payout under section 80D of the Income Tax Act, 1961!
- Term Insurance
Term insurance helps secure your family’s financial future and, as such, must be included in your tax saving investments portfolio. They are the essential instruments to protect your family against the uncertainties of life and to ensure that they are well protected, should something happen to you.
Thanks to its growing popularity, term insurance is available with many features and benefits at affordable premiums. When you invest in term insurance, you can rest assured that your family’s financial health is in safe hands. In case something happens to you due to an accident, a critical illness, or an untimely demise, the policy amount is paid out to the beneficiary so that they can get on with their lives as if you were still around for them.
While you may not be able to control the professional tax deduction from your salary, you can save tax by investing in a term life insurance policy that qualifies for up to Rs. 1.5L as per section 80C of the Income Tax Act.
- Child Education Plan
When you become a parent, you achieve one of the most significant milestones in your life. From here, it becomes your responsibility to ensure that your kid receives the best of everything. By investing in a child education plan, you will be able to give that benefit to your child. With the rising competition and cost of education, it is only fair that you start planning for it from an early age so that by the time your child comes ofage, you have the requisite funds to pay for their dream education.
Therefore, you need to weave this tax saving investment into your financial portfolio to pay for their higher education and college fees when the time comes.
When things like professional tax deduction chip away at your take-home salaries, instruments like child education plan ensure that enough is being saved for their future as you save money on tax exemptions too.
Unforeseen expenses can derail your finances and upset your life goals. However, with a proper understanding of your salary slip, its components such as professional tax deduction, and investing in the right tax instruments can ensure that you and your family members have adequate protection at every step of the way.
Professional tax deduction under the existing Indian tax system may not be in your control, but saving taxes is! By reviewing and understanding various investment options, you can preserve your income and also your financial security.
Online insurance plans from insurers such as Max Life Insurance enable you to compare and review various term plans options to invest in the right tax saving instruments. These plans also provide various long-term benefits apart from saving you taxes.