BENEFITS OF TAX PLANNING IN 2022
Tax planning helps taxpayers attain optimum tax efficiency through tax benefits. Many people only consider planning their taxes towards the end of the financial year. To evaluate all available options and make a prudent choice, you should plan your taxes right from the start of the year. At first, choosing the appropriate tax plan may seem overwhelming. With the right advice, you can maximise your tax savings.
Insurance policies serve as one of the most effective tax-planning tools. These disciplined investment-cum-savings plans offer you the opportunity to build a corpus, provide financial security to you and your loved ones in case of a mishap, and help you boost your tax efficiency. At HDFC Life, we offer multiple insurance plans that cater to the unique requirements of each individual.
What Are the Key Advantages of Tax Planning?
Let’s look at why you must prioritise tax planning:
1. To Reduce Your Tax Liability
The Income Tax Act provides several tax-planning investment schemes that can significantly reduce your tax liability.
2. To Minimise Tax Disputes
When you plan your taxes properly from the start, you won’t have to worry about possible litigation in the future. Minimising litigation keeps you protected from potential legal liabilities.
3. To Ensure Economic Stability
When you plan your taxes, you still pay what you owe to help the country’s development. Additionally, you can plan your finances and avoid worrying about last-minute tax deductions at source towards the end of the financial year.
4. To secure you’re Future
The main objective of tax planning is to redirect money from taxable income sources to various income-generating financial tools. These decisions ensure you optimise existing funds to secure your financial future.
Tax Benefits on Life Insurance Policies
Under Section 80C
As per the Income Tax Act, 1961#, you can avail of a maximum deduction of INR 1, 50,000 under Section 80C. You can only claim the deduction against premiums paid for a life insurance policy in the same financial year. You are eligible to claim deductions for policies that protect yourself, your spouse, your children, or another member of your Hindu Undivided Family (HUF).
Under Section 80CCC
Under this section, you can avail a tax deduction against payments you make to purchase an annuity or a pension plan offered by a life insurance company. The maximum benefits you can claim per year is INR 1,50,000.
Crucial Points to Remember:
Deductions under Section 80C and Section 80CCC## are not limited to resident Indians. Non-Resident Indians (NRIs) who help purchase insurance policies and pension plans from life insurance companies can claim benefits.
The maximum deduction available under Section 80C, including deductions under Section 80CCC and 80CCD##, is INR 1,50,000.
You can only claim deductions for payments made in the same financial year.
Exemption Tax Benefits
The maturity benefits or payouts received from life insurance policies also offer tax benefits. The amounts are exempt from taxes under Section 10(10D) of the Income Tax Act##, subject to the conditions mentioned therein.
Tax Benefits on Health Insurance Policies
Under Section 80D
Section 80D deals with payments made towards premiums of health insurance policies. Individuals can claim deductions against payments made for health insurance premiums and preventive health check-ups for themselves, their spouses, dependent children, and parents.
Individuals can claim a maximum deduction of up to INR 25,000 against premiums they pay for themselves, their spouse and dependent children. An additional deduction of up to INR 25,000 is available to those who pay the premiums for their parents. If the parents are senior citizens, the deduction limit increases to INR 50,000. So, the maximum possible deduction is INR 75,000 per year.
As per the Income Tax Act, taxpayers can claim a tax deduction against health insurance premiums or the medical expenses of a dependent with a disability. The deduction available is INR 75,000 per year. Those who have a dependent with a severe disability are eligible to claim a deduction of up to INR 1,25,000.
With adequate tax planning, you can minimise your tax liability and fortify your finances for your future. The earlier you start planning, the more time you have to make adjustments to meet your financial goals.
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# The above stated tax benefits are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time.
##The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.
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