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    Which Investment Options are Tax Exempted post Budget 2020

    Published on March 25, 2020

    The Union Budget 2020 was announced on February 01, 2020, and was presented by the Finance Minister Nirmala Sitharaman. Budget 2020 introduced a new tax regime to simplify the tax filing.

    Although people have the liberty to choose between the two income tax structures, the rising concern regarding the new tax regime is in the investment sector. According to Budget 2020, people opting to file taxes under the new tax structure will not be able to claim or benefit from the income tax deductions and exemptions under Section 80C and 80D of the Income Tax Act.

    Having said this, people would want to make changes to their investment plan by avoiding investing in tax-saving options. However, it is not recommended. There is still an investment strategy that allows you to save taxes with the new regime in place.

    You must have heard about the Unit Linked Insurance Plans (ULIPs), which is quite a popular investment option due to its dual benefits. ULIPs allow you to take advantage of life insurance cover and wealth creation. Under the existing tax structure, ULIP tax benefits are offered under Section 80C of the Income Tax Act.

    But the real question is, how does it benefit investors in the new tax regime? Well, here’s how.

    As we all know, ULIP investments are exempted for Long-Term Capital Gains Tax (LTCG). That way, you (the investor) will still be able to enjoy the maturity benefits under the new tax regime. On the other hand, ULIPs allow you to invest in equity-oriented funds, debt funds, and a combination of the two. Because of this, the investment strategy is focused on wealth creation while you still benefit from life insurance coverage alongside.

    However, for the existing taxpayers, it is highly advisable to continue with the existing tax structure. That way, you can continue to claim deductions on your investment options. In case you are filing tax for the first time, then you can opt for the new regime.

    Despite the confusion in the investment sector regarding the new tax regime, you can buy a ULIP plan or continue investing in your existing policy to benefit in the old as well as new tax structure.

    There are different ULIPs available in the market that allow you to invest in your specific financial goal. For instance, if you are planning to build wealth over time for your retirement, you can invest in a ULIP retirement plan.

    Similarly, if you are saving for your child’s education in the future, you can invest in a ULIP child plan. No matter what your financial goal is, ULIPs will help you accomplish it. Also, since ULIP is primarily an insurance instrument, it will protect you and your loved ones at the same time.

    Over to You!

    You can continue your investments and claim deductions for the same under the existing tax structure. The new tax regime is optional, and you have the liberty to choose when filing the tax. This decision can be made after in-depth research on the same. So, evaluate both the tax structures depending on your current financial situation, and then opt for the one that allows you to save maximum tax on your chosen investment options.