Tax Planning

Revenue Tax Deduction: Optimize Your Tax Planning: How To Make The Most Of The Tax Deductions Accessible

If you can’t decide how to do your tax planning, this route map will help you. Find out how to make the most of the tax deductions available to you.

Do you have adequate health insurance?

Covid has shown that Rs 2-3 lakh may not be enough. You will need family floater coverage of at least Rs 5-6 lakh.

If so: Good

If not:: Buy a comprehensive health insurance plan for your family and parents. Up to Rs 25,000 health insurance premium for self and family members and Rs 25,000 parent (Rs 50,000 if senior) may be deducted under Section 80D.

Do you have adequate life insurance?

Financial planners recommend life insurance that is 8 to 10 times your annual income. If there are big ticket loans available, increase coverage accordingly.

if so:: Good

If not
::
Buy risk insurance

Term insurance requires an income check and medical examination so you need to act immediately.


Do you still have credit to invest under Sec 80C?


If not
:: Your tax planning is complete.

if so
::
What is your risk appetite?


High risk appetite

Do you have reasonable equity exposure?

The recommended stock allocation in the portfolio is 100 minus your age.

if so:: Good

If not
:: Invest in ELSS funds

Don’t invest much more than Rs 50,000 at a time.

ELSS funds with the best performance
Best ELSS Fund


Appetite for medium risk


How soon do you need the money?

Your choice will depend on your liquidity needs.

  • In 4-5 years: Invest one third in ELSS funds and two thirds in NSCs or tax-saving bank FDs.
  • In 6-10 years: Invest half in ELSS funds and half in NSCs and bank deposits.
  • Over 10 years: Invest two-thirds in ELSS funds and rest in NSCs and bank deposits.

Appetite for low risk

Do you have a daughter under 10?

The Sukanya program only applies to girls under this age.

if so
:: Invest in the Sukanya program

If not::
How soon do you need the money?

Your choice will depend on your liquidity needs

  • 4-14 years from now: Invest in tax savings bank NSCs or FDs.
  • Over 14 years: invest in PPF.

Would you like to save more taxes beyond the limit of Sec 80C?

If you invest up to Rs 50,000 in NPS you will receive an additional deduction.

If not
:: Your tax planning for the year is complete.

if so:: Open an NPS account and invest up to Rs 50,000 in this account.

What is your risk appetite?

  • High:: Choose the maximum allocation to equity funds.
  • medium:: Opt for a balanced allocation or a balanced lifecycle fund.
  • Low:: Put 10-15% in equity funds or opt for the Conservative Lifecycle Fund.

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