When it’s about investments, we should have at least two clear expectations from them, first they will improve our wealth, and second, they will cause minimum tax liability. Fortunately enough we have several tax saving schemes available in India. However, you need to keep in mind that each tax-saving investment is different and invest accordingly.

Different Features of Tax Saving Investments

Almost all the tax-saving investments we see today are a result of the government trying to promote specific investment behaviours. These behaviours may range from financial safety from unfortunate events to post-retirement life. However, you will commonly find the following features in all tax-saving investments:

• Lock-in period for withdrawals
• Investment reduces your tax liability under section 80 of the IT Act

This is what has put every tax-saving scheme in India more suitable for specific goals. Also, the scheme risk profiles and tax-saving status differ. Therefore, you should carefully select these investments based on your financial goals and investment risk appetite.

The Efficiency of Tax Saving Investments

Any investment can offer tax saving at the following three levels:

• On the invested money, at the time of investment
• On the accrued or paid interest
• At maturity

For example, investment in both Public Provident Fund (PPF) and 5-year tax saving deposit will reduce your tax liability in the year of investment under section 80C. However, while any growth in the PPF will remain tax-free, interest accrued on the FD is taxable.

Similarly, the maturity value from PPF is tax-exempt but will be taxable for the 5-year FD.

Investments which offer all three tax saving are the most tax-efficient schemes. Fortunately for the most important financial goals in our life, we have multiple such investment options. These investments are also called EEE investments where ‘E’ stands for exempt, and three Es mean all three transactions as exempt from tax.

To meet such long-term goals you need investment options where you can:

• Invest money regularly for a very long time
• Invest small amounts
• Allocate your money according to your risk appetites
• Increase your investment amount in future
• Maintain tax-exempt status of investment at maturity

Investment Needs for Retirement Goal - Growth

Financial safety of workers has been the prime concern of authorities in India. Regular efforts in raising awareness and offer attractive retirement investment plans have given us several great retirement schemes. Also, unlike other financial goals, retirement goal has two very distinct phases of investment:

• Accumulation phase
• Distribution phase

If you are a 30-year-old investor, you will start to save for your retirement goal which is 30-35 years away from now. Until you reach your retirement goal, your retirement investment will be in the accumulation phase.

Once you retire, you will stop investing in the retirement corpus and start the distribution phase for a pension.

You will need to use two different investment plans for both phases of your retirement goal. While in the first phase you need high-growth tax-efficient investment, in the second you need safety and regular income.

Investment Needs for Child’s Higher-Education Goal - Safety

Goal safety should be your top concern when it comes to your child’s future. Your early demise will affect your children the most unless you can ensure the safety of goal achievement.

You need to invest the money in their goal in such a way that they can receive the intended money at the time of the goal, even when you are not there.

Investment Needs for Wealth Building Goal - Automation

Wealth building goal is where you would want to take additional risk on your investment for faster growth. But more than that, you will need to automate the investment as much as possible. Putting your wealth goal on auto mode is important unless this is your full-time dedication.

For example, invest via account auto-debit option, automatic portfolio management for adjusting the asset allocation according to market.

Most Efficient Investment Option for the Goals

When it comes to tax-efficiency and diversity of investment options, nothing beats ULIP investment plans. Whether you want to invest aggressively towards a prosperous post-retirement or want to secure your child’s education goal, ULIP plan has it all.

Unit Linked Insurance Plans (ULIPs) Features

ULIP plans are one of the most tax-efficient and capable investments. You can customize your ULIP investment to meet all three goals using the following features:

• EEE Investment: If your annual investment remains below 10% of the sum assured in the plan. Investment up to Rs 1.5 lakhs is exempt under section 80C
• Multiple Asset Allocation options: Invest in a combination of equity, debt and liquid funds as per your risk appetite
• Multiple Portfolio Strategies: Make the most of the equity market investments with automatic portfolio management options. ULIP will automatically allocate more funds to equity when markets are not doing well so that your portfolio grows faster when it does.
• Financial Safety for Family: Life cover in this plan will make sure your family receives financial support in the event of your early demise.
• Goal Safety: Protect your spouse from inadequate retirement corpus in case of your early demise. The insurer will continue to invest on your behalf until maturity, and your family will receive the maturity value at the intended time.
• Boost Your Portfolio: ULIPs such as Invest 4G from Canara HSBC Life add bonus units to your portfolio if you are a long-term investor. You can benefit from these boosters if you invest regularly for more than five years in the ULIP. The longer you keep investing the more bonus units you receive in the portfolio.

You can use the feature-rich ULIP plans to conquer any long-term financial goal you have. Also, if you follow the tax rules, maturity value or any partial withdrawals from ULIPs will be completely tax-free.

You can even use a single ULIP investment plan to meet multiple goals. See How to Use a Single ULIP Plan to Meet All Your Life Goals for more details.

No matter how smart they are, most people feel the stress and nervousness when it comes to filing taxes. The mere thought about the complexity of the process and cluelessness are enough to put one through a lot of tension. If you too are dwelling with such troubles and don’t know what to do, you have reached the right place.

In this article, you will get the complete guide of filing ITR 3 Form and all the answers to the whole slew of questions about the process, life insurance plans for saving on taxes to other ways you can cut on taxes. Read on to know more.

What is the ITR 3 Form?

Let’s begin with the basic definition to gain a proper understanding of the form. Every taxpayer in India has to file a form, known as ITR forms or Income Tax Returns forms. These help in disclosing information related to their income and the applicable tax to the Income Tax Department.

Now, there are around seven types of ITR forms ranging from ITR 1 to ITR 7 form. Depending on their eligibility, people choose the form for filing taxes.

ITR 3 form applies to those individuals of Hindu Undivided Family (HUF) who earn their income through their own business. However, this does not apply if they are a partner in a firm. Such people will be eligible for other ITR forms.

Do You Need to File ITR-3 Form?

As mentioned above, the taxpayer should be an individual or HUF running their own business. Here are some other eligibility criteria you need to have to file ITR 3 form:

• You are the director of a company or business.
• Your residential status is resident and non-resident of India.
• You are getting income from a pension.
• You generate earnings from house property.
• You have investments in unlisted equity shares.
• You fall under the category of people whose income is chargeable to tax under “profits and gains of business or profession” like, interest, salary, bonus, commission or remuneration.

What is the Due Date for Filing ITR 3 Form?

Earlier, the due date for filing ITR 3 forms for the financial year 2020-21 was July 31, 2020. However, the Indian government has extended the last date due to the ongoing pandemic of COVID-19.

The new due date for Income Tax Return (ITR) filing for AY 2020-21 is November 30, 2020.

How to File ITR-3 Form?

There are two methods for filing ITR 3 form: online and offline. However, the government strictly advises taxpayers to choose the online option. There are exclusive cases where offline filing is allowed. Below, we have discussed both the options elaborately:

Online Method

For this method, you will need to visit the e-filing portal of the Income Tax Department. Once you click on the form, fill it completely, and verify the same with your digital signatures. You will get an acknowledgment receipt after the successful form filing on your registered email-ID.

In cases where digital signatures are not available, you can verify it using the Income Tax Return Verification form (ITR V). It is sent by the Income Tax department once you have filled the form online. After signing the form, you can send it back to the official address of the IT department.

Offline Method

Offline method for ITR 3 form is allowed if you are a super senior citizen, i.e., 80 years or more. This is also applicable if your income is lower than Rs 5 lakhs and you do not have to possess any income tax fund request.

Now, in case you are eligible for the offline method, you can submit the ITR 3 form in a barcoded or paper form. Just visit the official website of the Income Tax Department and download the form. Fill it properly and submit the form. In case you still need help, consult a CA.

How to Save Tax on Your Total Income?

• Unit Linked Insurance Plans: Also known as ULIPs, this tax saving instrument is the best tax saving plan under Section 80C of Income Tax Act. You will be entitled to tax redemption of Rs. 1.5 lakh under this scheme on the money you invest in ULIPs.
• Equity Linked Savings Scheme (ELSS): Another top method to save taxes, ELSS funds also fall under the 80C basket. They are known to generate the highest return with the shortest lock-in of three years.
• Life Insurance: Just like ULIPs, life insurance plans also come under Section 80C. The premium is deductible under the income tax calculations.
• Public Provident Fund (PPF): One of the safest tax saving plans, PPF is favourable for safe returns, taxability, and costs.
• Sukanya Samriddhi Yojana: Backed by the Indian government, this scheme offers tax deductions under Section 80C up to the maximum amount of Rs 1.5 lakhs.
• National Pension Scheme (NPS): As the name suggests, this scheme aims to provide financial security to investors on retirement. NPS also comes with a claim deduction of up to Rs. 1.5 Lakh on the total principal amount.

In addition to this, some other ways you can cut on taxes include:

• Home Loans: In case you are an owner of a property and have taken a home loan, Section 24 of the Income Tax Act allows you to claim a deduction up to Rs. 2 lakhs on home loan interest.
• Education Loan: The Section 80E of the Income Tax Act 1961 allows taxpayers to claim a deduction on education loans.
• Charitable Donations: Under Section 80G of Income Tax Act, you can claim a tax deduction on the amount offered to NGOs and relief funds as donations.

Now that you know how to file your ITR 3 form and save taxes as well, make sure you put this learning into practice. This will help in planning your savings and have a financially stable future.