Tax Strategy To Save Money

1. Term insurance: If we invest in long term investment plans from insurance companies like ULIPs or endowment plans it is likely that if the DTC is introduced our premiums due next year will not be tax deductible if it does not meet the criterion. Premature withdrawals and lapsed policies are punished very severely by the charges on these policies. A term policy on the other hand will always be tax deductible and will do enough to protect you. 

2. Equity Linked Savings Scheme (ELSS): Even though we might only have the ELSS for one more year, it is still the best tax-saving equity investment available to us. Several viewers have expressed concern about redemption pressure these funds might face after the DTC comes in. But remember, money invested in ELSS has a 3-year lock-in which means it won’t be possible for investors to pull all their money out at once. So pick a well managed fund, with a good track record this year and invest in spurts over the next 2 months. 

3. Infrastructure Bonds: With an assured return of 9% over 10 years these bonds make a very strong case, work in the added tax deduction and there is little reason for us to skip this option. 

4. Health Insurance: For example your dad just had a knee replacement surgery that billed for over Rs 5 lakh. Irrespective of the tax deduction, there is no excuse for not having enough health insurance, especially for the senior citizens in your families. 

5. Home Loans: Our home loan principal repayment might not be tax deductible under the DTC, but that is not going to stop us from buying and owning homes. If you have a running loan this year make the most of it.