Last month, salaried taxpayers had to choose between the old and new tax regimes. Most tax deductions are not available under the new tax regime, so those who have chosen to go with the new regime may be thinking of discontinuing the tax saving investments they started in previous years. However, some of these investments should not be stopped just because there is no tax benefit. They may be serving other critical purposes in your financial plan.
Read More: Income Tax: Key Things to Consider Before Choosing Between New Tax Regime and Old Tax Regime
PPF: Continue investing to build tax-free corpus
In the past few years, many investment options have moved into the tax net but the PPF remains completely tax-free. The small savings scheme is a good way to build a retirement corpus that earns tax-free interest and is tax-exempt on maturity. If you have investible surplus, keep investing in this tax-advantaged scheme.
Term insurance: Keep paying the premium for protection
Life insurance is not bought to save tax, but is meant to provide financial support if the policy-holder dies. This is especially true for pure protection term insurance plans that give a large cover at a low price. Even if there is no tax benefit on the premium, do not stop paying the premium of your term insurance policy.
Read More: Income Tax Refund Status: Check Online In 4 Simple Steps On IT Dept Portal
Medical insurance: Continue this critical cover irrespective of tax benefit
Continuing this cover is just as important as the term insurance policy. Don’t stop your medical cover because there is no deduction for the premium. As Covid showed us two years ago, the absenceof medical insurance can ruin a household’s finances.
NPS: Invest under sections that offer tax benefits
Even though there is no deduction under Section 80C under the new tax regime, the contributions to NPS under Section 80CCD(2) will continue to enjoy tax benefits. If you have opted for the NPS through your employer, continue contributing to the scheme to get the tax benefit.
ELSS funds: Stop SIPs and move to regular funds
This is one tax saving investment you can stop if you move to the new tax regime. Instead of putting money in a fund with a three-year lock-in period, you can invest in a regular equity diversified fund.
Read More: Are Gifts By Your Spouse Or Family Members Taxable? Here’s What IT Department Says
Traditional insurance plans: Consider surrendering or turning paid up
Insurance policies you bought to save tax may not be very useful now. Policies that have completed three years can be surrendered or turned into paid-up plans.
Do this for plans that still have several years to maturity. If maturity is just 3-4 years away, it’s better to paythe premium in full.
NSCs and tax-saving FDs: Avoid locking money in illiquid options
The interest rates of these fixed income options have risen in recent months. Even so, they should be avoided due to the low liquidity they offer. Instead, you can invest in bank deposits of 1-2 years which can be prematurely closed if required.
