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COVID-19 Lockdown: How to Plan your Finances and Save Tax

May 15 2020
Save tax during the lockdown .

Lockdown phase 1, 2, 3… Our country may have come to a somewhat grinding halt, to stop the spread of coronavirus. While essential services continue to run, many of us have faced pay cuts, lost bonuses and increments, and suffered financial losses. Most of us are restricted to our homes and can head out only for essential products and services.

In such times, saving is on everyone’s mind, especially saving on taxes with better financial planning. No one could’ve predicted this situation, but now that we’re already in it, we’ve still got a chance to enjoy our share of savings. The deadline for tax-saving investments has been pushed to June 31, which has become a small silver lining for taxpayers. If you’re wondering how you can make last-minute investments when the nation is under lockdown, we must tell you there’s a way. Sure, visiting the offices of financial institutions is nearly impossible due to movement restrictions under the nationwide lockdown. However, we’ve got a few options to help you save income tax through online instruments. Check out our tax planning suggestions; all of which you can pursue digitally without any human contact!

Option 1: Buy health insurance

What’s your current insurance status? If you’re uninsured, you should know that investing in health insurance gives you a dual saving benefit. It helps you save money on exorbitant medical bills and on tax too (under Section 80D). Diagnosis and treatment of COVID-19, or any other serious medical condition, can cause you undue physical, mental and financial stress. Paying for these out of pocket can drain your finances quicker than you thought. Relying on group health insurance provided by your employer isn’t safe either, as the economy is itself at risk, thereby putting your job at risk too. In such a scenario, having a personal health insurance plan is your best bet. You don’t have to step out of your living room to buy a health policy. You can easily purchase from the comfort of your home. In times of social distancing, getting a health insurance plan online will help you make a valuable investment without breaking protocols. Be sure to cover the whole family with a floater cover along with add-ons that take care of hospitalisation, OPD expenses and emergency costs.

Option 2: Donate to PM-CARES

Another investment that offers the benefit of tax exemption is donating to charity (under Section 80G). By donating to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM CARES) fund, you can do your bit towards helping government-driven coronavirus relief measures. A lot of daily wage labourers and other migrant workers’ lives have been struck due to the lockdown situation and the resulting dearth of jobs. Even a small donation from the more fortunate citizens goes a long way to help our less fortunate countrymen. So don’t hesitate before making a contribution online to this noble cause! You can visit the PM-CARES website and make the payment online in a jiffy. Don’t forget to download your receipt so you can claim your deduction at the time of filing an income tax return. You can also make a similar contribution to the Prime Minister’s Relief Fund, or even a state-specific Chief Minister’s Relief Fund if you prefer.

Option 3: Invest in a risk-free scheme

Most investors are in two minds about opting for risky investments, given the current market scenario. Mutual funds and other similar financial products may appear unsafe to invest in at the moment, given the possibility of further economic turmoil due to coronavirus. On the other hand, there are a few safe investment instruments that you can go for. Investing in a five-year fixed deposit or the National Pension System or Public Provident Fund brings benefits to investors without the risk. So go ahead and look them up to figure out which one suits your needs. You can make any of these deposits online through their website or mobile app; which eliminates the need to visit a physical branch or office for payments. These deposits provide much-needed tax exemption benefits to depositors. However, it is important to note that some such deposits come with a long lock-in period, during which you may not be able to withdraw your funds. So it’s better to put a small sum in these and another sum in health insurance to take care of emergency medical expenses.

No one can be sure how the roadmap out of lockdown will shape up, and when its disruptive effects on the Indian economy will be erased completely. In the meantime, what we can definitely do is plan our finances well and ensure we invest our hard-earned money in the right products. Paying health insurance premiums, depositing in safe tax saving instruments and donating to a charitable cause all fit into this strategy. It will help us stay safe in adverse financial conditions, both during and after the lockdown. The COVID-19 pandemic may have restricted our movement and caused us financial anguish, but we can still make investments online and save on taxes!

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