Page 41 - Banking Finance July 2023

ARTICLE

Mr. Savings Rao could invest this amount in any interest/
dividend giving instrument every year till he retires i(ie) for
30 years - doesn't it accumulates into a HUGE CORPUS ?

U/S 80C: (he can invest in any one of the following financial
instruments)
Contribution to Provident Fund -
150,000 X 30%=45,000X104%= 46800/-
Contribution to Public Provident Fund 46800/-

Payment of life insurance premiums 46800/-
Investment in ELSS mutual funds 46800/-
Repayment of housing loan 46800/-
Tuition fees for children's education 46800/-
Investment in fixed deposit with banks instruments to complete the financial planning for different
and postoffices (5years) 46800/- future financial needs.
National Savings Certificate 46800/-
Insurance planning involves building a plan of action that
provides adequate insurance against FOUR D's viz., Death,
He can further invest 15600/- if he contributes
Disease, Disability, and Dependence. This involves creation
to NPS as below:
of an estate with small amounts pooled over a longer period.
U/S 80 CCD(1b)
Hence the Insurance planning should be started early in the
Contribution to National Pension System = life with amounts invested in an appropriate insurance plan
50,000X30%=15000X104%=15600/- as per the risk to be covered - any or all the 4D's mentioned
above.
If Mr. Savings Rao invest above mentioned saved amount in
Banks/post office savings instruments, upto 10k interest
Protection against the untimely death is available with TERM
amount he does not require to pay tax as such the saved
plans. In the market, currently there is so much demand for
amount is
these products thanks to the COVID19 pandemic. The
U/S 80TTA
demand has been so high since the year 2020, that all the
Savings interest =10000X30%=3000X104% = 3120/- insurance companies have enhanced the premium rates of
their TERM plans by 20% on an average. Many companies
However the interest earned over and above 10k would be have already announced their plans of further increasing of
taxed at the appropriate slab of the assessee (for e.g. 30%). these premium rates in the second part of 2022. This shows
the demand for these plans in the market.
One can plan his finances in such a way that his investment
in banks/post offices should be restricted to get an annual Similar trends were also observed in Health insurance sector
interest of 10 k and the balance amount can be invested in that provides protection against Diseases through medical
Equity mutual funds or Stocks so that the tax payable would support systems. Although the awareness of having a health
be 15% only under STCG (short term capital Gains) tax. insurance policy has significantly increased thanks to the
instead of saving in bank/post office accounts and paying COVID pandemic, many people still don't understand its
interest. importance. Today, maintaining a good health is a big
challenge as the stress levels, and risk of lifestyle-related
The third Iof this principle is Insurance - how to use insurance diseases are increasing every day. With the rising medical
as a better tool for financial planning. Whatever be the inflation, securing a required health insurance policy must
amounts one had saved in Inflation planning and Income- be an integral part of efficient financial planning. Having a
tax planning, that can be invested in various life insurance comprehensive health insurance policy allows to provide the

38 | 2023 | JULY | BANKING FINANCE