Monday, February 12, 2007

Insurance and Taxes

Lot of people in India invest in insurance products to save taxes. Taxes also happens to be one of the biggest selling weapon used by insurance agents. But saving taxes should n't be the primary criteria for buying an insurance policy. The purpose of insurance is defeated if one is looking purely for tax breaks. The main purpose of insurance is to provide adequate financial security to your family. One should first ensure that the Sum Assured is adequate to meet all your liabilities and future obligations towards your family. Taxe breaks are only an added benefit.

If you are buying insurance purely for tax breaks, then you have choosen the wrong product. Equity Linked Saving Schemes are a better product to invest in for saving taxes.

7 comments:

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Rama Mohan said...

So what is the way to save money from income tax?

Raj Gopal Vuppala said...

For saving taxes, invest in ELSS (tax saving MF's).

Ketan said...

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Austin, TheOrangePaper.com Guy said...

In my opinion too ELSS is a good tax saving avenue. Insurance should not be looked upon as a tax saving instrument.

You have really interesting articles. Looking forward to reading more of your blog.

Austin
http://www.theorangepaper.com

Priyanka said...

I so agree with ur recommendation for tax saving purpose as ELSS schemes are anytime better for it in term of returns and liquidity!

Priyanka Srivastava