How you can create wealth by investing in tax saving plans

People invest in endowment plans because they are a good investment opportunity; they want to save money for their future plans, their children, their education etc. But one of the biggest benefits of an endowment plan is that they are a great way to save tax. Under Section 80C of the Income Tax Act, the government does not levy a tax on the money you invest or that goes into your insurance plans or endowment plans.

Tax saving measures can help you save an enormous amount of money. As important it is to invest in funds, it is also imperative to save money. And, claiming tax deductions is one of the ways for doing the latter. Because, the money you save from tax deductions could be further invested into equity or other long-term funds to grow your wealth.

ULIPs or unit linked insurance plans are a great way to invest your money while at the same time insuring yourself. Here’s how a ULIP plan works, the premium that the policy holder pays are divided into two parts, one goes to the life insurance and the other goes to mutual funds as an investment. A ULIP holder has the option of either investing in equity or in debt. An aggressive policyholder will choose to invest his money in equity while a conservative policyholder might choose to invest his money in debt. The money is invested during the term of the policy which may range between 5 to 15 years.

Apart from ULIPs the government has devised a number of plans and schemes to help people save on their income tax. These tax savings plans will help you save money and in turn create wealth. Some of these savings plans are, the public provident fund (PPF), the Rajiv Gandhi Equity Saving scheme, the voluntary provident fund, national saving certificates and the Sukanya Samridhi account.