In these times of financial suspense, if anything stays constant, it is the basics of money management. Get your basics right and you will be safe. When you go for a swim, if you are not sure how deep the water is and where, will you venture out too far? Of course you won't. So here are some basic tips to help you take charge of your money and the taxes you pay for earning it.
Get insured
Go for a term insurance plan which gives you a bonus upon maturity or claim. This is necessary, more so if you are married and have a family to support. Talk to a financial consultant and talk to your relatives and friends who might have already bought a policy. Have a look at your expenses, any major upcoming purchases and children's education and marriage plans and determine your needs accordingly. Add an Accidental Death/Disability Benefit feature, especially if you drive to and from work or frequently travel out of town for work. Every individual has unique needs. So it is worth spending a few days with your spouse, parents etc. to decide what your needs are.
Buy health insurance
Health insurance is nothing but medical insurance. It is a must. Medical treatment at good hospitals is extremely costly. Undergoing surgery or even a few days of intensive care can push you back financially by a couple of years or even more. Make sure you take a policy which covers critical illness, terrorism etc. as they are normally not covered under a basic health insurance plan.
Invest in PPF
PPF stands for Public Provident Fund. A PPF account has to be held for a term of 15 years from the close of the financial year in which you paid the first subscription. But after the end of the 5th financial year, if you need money, you can withdraw up to a certain percentage of the balance. You can also extend the PPF account for 5 years at a time after it matures.
You need to invest at least Rs.1000 each year and a maximum of Rs.70000. The amount can vary each year, depending on how much you can set aside. It is not advisable to touch this fund unless you are faced with an emergency. A PPF account yields a better return than a savings account and is totally safe. Fifteen years later, when you withdraw the money, you will be glad for having invested in a scheme that helped you secure your future.
Tax Benefits
Deposits in PPF and life insurance premium payments are eligible for deduction from your total income under section 80C. The combined limit for deduction Section 80C and its various sub-sections is Rs.100,000. You can claim a deduction for health insurance premium u/s 80D subject to a maximum of Rs.15,000 (Rs.20,000 for Senior Citizens).
Follow these basics and you do not need to worry about surviving economic depressions. Cut back on spending? Yes, may be. But certainly not worry. For as they say:
Tough times don't last; tough people do.
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2 comments:
Although the information posted is good, I just had a query:
Can I claim deduction if I go in for a Personal Accident Policy? What about adding the Accident Death Rider as mentioned in the post?
Dear Traffic Kumar,
No deduction is available for a Personal Accident Policy under any section. However, in our opinion, when you claim a deduction for life insurance premium, you can include the Accidental Death/Disability Benefit (ADB) Rider amount. The reason is that whether life is lost by any means, you are paying the premium for life insurance. So even if it’s an Accidental Disability Rider, it is a Rider – a part of the life insurance policy. E.g., if the life premium is Rs.3000 and ADB is Rs.200, you can claim the entire amount of Rs.3200 as a deduction under section 80C.
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