Tax Saving Insurance: Term insurance proves helpful in saving tax, but people often repeat some mistakes while buying it…
The current financial year is now on the verge of ending. Right now the last month of the financial year is going on and now only two weeks are left in this month. After the end of March, the financial year 2023-24 will also end. After that, the new financial year 2024-25 will start from the first date of the next month i.e. 1st April.
This is an important time for tachypayers. Especially for taxpayers falling under the income tax net, this is the last chance to save tax. Taxpayers who want to save income tax will have to invest in the available options before March 31.
Section 80C of the Income Tax Act proves to be very helpful in saving tax. Under this, taxpayers can claim tax deduction up to Rs 1.5 lakh. Many taxpayers buy term insurance for this. Zerodha has told the taxpayers about the 3 common mistakes that taxpayers often make while buying term insurance.
Error in calculation of cover
According to Zerodha, the first mistake people make is in calculating the cover. For this, people follow the thumb rule of 10 to 15 times the annual income, which is not right. Everyone has their own needs and responsibilities, which are different from the average. For this reason, while buying term insurance, the taxpayer should also consider his age, dependents, tenure, expenses, loan, rent, children’s education fees etc.
Mistaking insurance for investment
Salesmen may encourage you to buy endowment plans or ULIPs, which offer the benefits of investment returns along with death benefit. Taxpayers should avoid buying such plans. These prove to be quite expensive compared to simple plans. The higher the investment, the higher the return or death benefit. It is better to buy a simple plan and invest the remaining money elsewhere.
unnecessarily long tenure
Many times people think that the insurance plan should be till death. This is also not right. By the time you are 60 or 70, your dependents will be financially stable. They will be able to take care not only of themselves but also of you and their brothers and sisters. This means that it does not make sense to spend extra on a long tenure plan without any need.
