Tax Saving, a buzz word that is commonly used in salaried class to get exemption from income tax. So, what are various ways one could save tax and which among them is the best. The answer varies from person to person depending on their knowledge about various financial products.
When someone asks, what is the first thing that comes to our mind when tax saving is to be done. Undoubtedly it is Life Insurance. Yes, people will start thinking about life insurance first. May be it could be because they were under the influence of marketing gimmicks by the Life Insurers or they simply follow their colleagues in office.
There are many life insurance plans that could avail you tax benefits under Section 80C of income tax act. But most of the people tend to buy ULIPs in a hurry to meet their tax saving deadlines of Dec/Jan months. They buy an investment product sold in the name of insurance product. They end up with low insurance cover and high premium.
In the name of tax saving, do not go for low risk coverage products like ULIPs, instead opt for term plans. You should have sufficient insurance coverage and you should not look at it merely as a tax saving option. If the sole purpose is tax saving consider investment products like Bank FDs, ELSS Mutual Funds, PPF, NSC etc, also look at their lock-in period and tax implications on marturity. In fact never mix up your insurance with investment. Insurance is a long term commitment where as you invest when you have money.