7 online tax saving investments for late starters

Did you opt to continue with the existing tax regime for FY 2020-21? Well, then you have time till March 31 to complete your tax-saving investments/expenditures. For FY2020-21 an individual can opt for the new tax regime which offers lower, concessional tax rates without any tax deductions and tax exemptions or continue with the old tax regime of higher tax rates combined with various tax exemptions/deductions.If you are planning to opt for the old tax regime in FY 2020-21 and have still not finalised the financial products to invest in to reduce your tax outgo for the year, then you can consider these online options to save time on paperwork.1. 5-year tax-saving bank fixed depositThe most hassle-free online tax saving investment is the five-year tax-saving fixed deposit (FD). If you have a know-your-customer (KYC) compliant bank account and have access to Internet banking, then you can easily invest in the five-year tax saving bank fixed deposit. All you need to do is log in to your Net banking account and invest from there. While making an investment, do ensure that you have not enabled the auto-renewal option (unless you want to) or else on the day of the maturity your tax-saving bank FD will get auto-renewed for the next five years. Once the investment is done, premature withdrawal is not allowed in case of a tax-saving FD. If auto-renewal option is not selected, then maturity proceeds come directly into your bank account.Bank FDs offer two interest payment options - cumulative or non-cumulative. The interest earned is to be added to one's income and is entirely taxable. Banks offer higher interest rate to senior citizens, usually 0.50% more than those offered on FDs made by non-senior citizens.To know the top-5 tax-saving bank FD interest rates click here. Do keep in mind that although a product like this helps in saving taxes and will preserve your capital, it will not help in wealth creation over the long term. This is because most often post-tax returns from bank FD are lower than the inflation rate for those in the 30% tax bracket.2. Term life insurance policyAn individual can buy a term insurance policy or a unit-linked insurance plan (Ulip) online. However, buying a term life insurance policy online may not work at the last minute as you might be called for medical tests or the underwriter may require more information before issuing you a policy.Your tax benefit for FY 2020-21 will depend on the issuance date. If the issuance date is after March 31, 2021, then you will not get the tax benefit for FY 2020-21.Amit Chhabra, Head-Health Insurance, Policybazaar.com says, "Term life insurance policy issuance is a usually long process and often takes 4 - 7 days. This is because while buying a term life insurance plan, customers need to undergo telemedical tests and at times even physical medical if the customer suffers from a pre-existing ailment. Moreover, apart from your health, life insurance companies also verify your financial background in order to evaluate your financial worth before issuing a policy. Coming to a health insurance policy, over 60 per cent of the policies are issued to the customers instantly provided they are buying the policy while they are young and do not suffer from any pre-existing ailment. Approximately 30 percent of policies are issued in 1 - 3 days while the remaining 10 percent in 4 - 6 days' time. These are mostly policies where customers suffer from pre-existing conditions like diabetes and hypertension. People who wish to avail tax benefit along with protection cover while buying insurance products must not wait for the last minute to buy insurance and must rather people at the earliest. Tax benefit can only be availed once the policy is issued to the customers."3. UlipsOne can buy Ulips online by visiting the insurer's website. As there is no intermediary involved, there is no commission that gets paid to any agent when it comes to online Ulips. The process of applying and making payments through Net banking or credit card will be done entirely online. Do keep in mind that Ulips bought on or after February 1, 2021, having annual premium of more than Rs 2.5 lakh, will be taxed at the time of maturity in the same way as equity shares and equity mutual funds.4. PPFIf you are planning to open a Public Provident Fund (PPF) account for tax saving, then ensure that you have started the process of opening the account as soon as possible. Opening of a PPF account with a designated bank in itself may take a few days. You can only fill-up the form online by logging into your Internet banking account. You will then have to take a printout of the account opening form and submit it along with certain other documents at the bank branch for verification.However, if you already have a PPF account, then transferring funds from the linked savings bank account, or from another bank account, can be done easily via net banking. To avoid having to manually transfer funds into your PPF account, you can submit standing instructions to the bank. 5. Home loan repayment/prepaymentIf you have an on-going home loan, then there are two types of tax benefits available. Tax deduction under section 80C of the Income-tax Act, 1961 is available on the principal amount repaid of the home loan. Further, the interest paid on the loan gets a tax deduction of maximum of up to Rs 2 lakh under section 24.Also Read: All the tax benefits on home loanTo save more tax, you can prepay a portion of your home loan. The prepayment of a home loan will help you to fully utilise the limit available for tax saving. For instance, if the principal amount repaid is Rs 1 lakh, by making a prepayment of home loan which increases the amount repaid one can make full use of the section 80C deduction limit of Rs 1.5 lakh.The prepayment of the home loan will also help you save on interest cost as it will decrease the total interest outgo since the loan tenure gets reduced. The higher the prepayment amount and the longer the tenure, the more will be your savings.To prepay the home loan online, one needs to add the home loan account as a third-party account then transfer the funds using the Net-banking facility. Prepaying the loan online is faster than going to a bank branch with a cheque.6. Health insurance policyThe novel coronavirus pandemic has made many people aware of the importance of having a health insurance policy. An individual can buy health insurance online by visiting the website of any general insurance company or a standalone health insurance company or aggregator. However, there could be a requirement of medical tests or the insurer may not allow buying online above a certain age or sum insured amount. Usually, insurers allow individuals up to the age of 45 to buy health insurance plans online.7. ELSSEquity-linked savings scheme (ELSS) mutual funds come with the shortest lock-in period of three years among other options such as PPF, EPF, Tax-saving FD etc. Online investments can be made by visiting the fund house's website or aggregator portals, however, ensure that you are KYC compliant. Though there is no limit on the maximum amount that can be invested, the maximum deduction that can be claimed in a financial year is Rs 1.5 lakh under section 80C. By investing online, you can choose between the regular and direct options. As against a regular option, the direct option has lower expenses as it is free of distribution commission. In the long run, it will translate into huge savings. Choosing the right ELSS fund is, however, something one needs to do diligently. Click here to find out how to invest in ELSS mutual funds to save taxWhat you should doWhile conducting online transactions, ensure that you have successfully completed the transaction and have received the confirmation for the same. If for some reason your transaction is not successful (and you do not re-attempt it), then you might miss the opportunity to complete the tax-saving exercise for FY 2020-21, which in turn will increase your tax outgo.

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