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Do Tax Saving and Investments Go Hand In Hand?

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Tax Saving and Investments
October 01, 2023

Tax regime and the guidelines for filing of returns in the incumbent set up in our country is a major economic exercise and in some cases, saving on these taxes under relevant sections is something that we all look forward to. What is of the utmost concern is for you to understand that tax-saving can be seen as a way of generating an investment platform, even if not so direct or active. Naturally, we all want to safeguard our financial interests in the form of returns or monetary gains. Both for short term and long term investments, understanding the structure of taxation on returns is very important as it enables one to choose wisely from a host of options so that substantial returns can be generated and to ensure that taxation does not eat into the hard earned savings and investment payouts.

Understanding the schemes that allow the earnings to be tax-exempt is also important and there are a host of such schemes. For instance, investing in ELSS (Equity Linked Savings Scheme) i.e. diversified equity mutual funds is one such option that allows a tax-free investment (up to Rs. 1.5 Lac in one financial year). Moreover, the lock-in period offered is 3 years. There are also the options of seeking dividends or growth in ELSS, depending on whether the purpose of investment is regular income based or long term return based. Although the returns are not 100% guaranteed and are dependent on equity performance, yet choosing the growth option over the dividend option while investing in ELSS does provide tax benefits under relevant Section 80C of the  Income Tax Act, 1961. Investing in Public Provident Fund (PPF) is also a favored savings platform, given the fact that the returns are tax free and there is a guarantee of interest.

Another guaranteed way of safeguarding the returns on investment is through investment in ULIPs (Unit Linked Insurance Plans). A ULIP allows the execution of joint strategies of savings, along with financial protection and security against risks. Having the lock-in period of 5 years and the total term duration of 15-20 years, a ULIP is quite favored when it comes to assured income protection and returns after maturity. Under Section 80C, the returns on exit (after 5 years) for a ULIP are tax free.

Investment in traditional insurance plans is one more option that has remained ever popular recourse for fiscal gains and safety. However, choosing a specific plan goes a long way in targeting the financial woes and must be done in addition to purchasing a general life cover. Other than this, there are lists of schemes that offer tax benefits, e.g. SSY (Sukanya Samriddhi Yojana) under the Beti Bachao Beti Padhao campaign.

Therefore, adopting a research-based outlook to general and specific investments is equally crucial and goes a long way in ensuring that tax savings and returns on investment remain intact. For further details on insurance plans offered by HDFC Life and various key features of specific plans, kindly visit us at the mentioned link:

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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