Saving money aside, smart tax planning is an integral part of sensible financial planning. The average investor enjoys numerous tax-saving options like PFs and PPFs, life insurance plans, ELSS investments, ULIPs and more. When comparing different instruments, it is always advisable to choose an option that offers the combined benefits of wealth protection, value appreciation, strategic flexibility, and tax savings.
A traditional insurance plan offers life protection and tax benefits with very little scope for wealth creation. Mutual funds, on the other hand, offer good returns with zero life protection and restricted tax-saving opportunities. Conservative tax savings options like PFs are unlikely to generate inflation-proof real returns over the long run. ULIPs are a useful financial tool that can be used to bridge the gap between the various investment options along with the added advantage of significant tax savings.
