Why 31 March is important if you are interested in tax saving

The Indian fiscal year is quite near to its completion as 31st March will be the last of closing, and from 01 April onwards, all the transactions will be accounted for in the new financial year. So, this particular month of March has unique significance in making financial decisions for investors and taxpayers. Since tax saving is one of the most crucial benefits of investing in various kinds of insurance plans, people interested in availing of this benefit must invest in a plan by 31st March. Else, they will not be entitled to enjoy tax-saving benefits this year.??

For people whose annual earning is beyond the exemption limit. Still, for those who have yet to invest in any tax-saving insurance policy (excluding ULIPs) where an aggregate premium is over Rs 5 lakh, the maturity amount will not be exempted from tax. As per an individual's and family's needs and priorities, many lucrative plans are available in the market, ranging from child education to health to retirement plans. Amongst the popular tax-saving options available today are PPF, FDs, life and health insurance premiums, and returns on education policies for children. Precisely, National Pension System (NPS), Unit linked Insurance Plans (ULIPs), Equity Linked Savings Schemes (ELSS), and Senior Citizen Savings Scheme (SCSS) are some of the best plans with guaranteed lucrative returns.?

Now, one thing should be remembered by all the investors that in the Union Budget 2023-24, the Finance Minister has announced a slew of changes. Among these, one of the key announcements was the finance minister’s proposal regarding high-value insurance purchases. The FM declared that the maturity amount would not be exempted from tax for insurance policies (excluding ULIPs) where an aggregate premium is over Rs 5 lakh.

Notably, this will be applicable for the life insurance policies issued on or after 1 April 2023, and income from only those policies with aggregate premiums up to Rs 5 lakh shall be exempted. It will only affect the insurance policies issued on 31 March 2023. For investors looking for high-value insurance purchases to make a long-term gain out of their insurance policies, purchasing a policy before 31 March is the best way to avoid taxation on the maturity of the guidelines.

Mostly, investors prefer plans based on guaranteed and annual tax-free returns. The new rule might significantly impact the net worth of investors planning to invest an amount premium above Rs 5 lakh. For them, the best strategy would be to either purchase a high premium before 31 March to leverage tax benefits or to consider mutual funds as a better alternative.