11 Investment Tips for New Employees to Save on Income Taxes

2024-08-02

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As a new employee, you must always remember that you have an income tax liability, depending upon your annual salary. As per your annual income, you are categorised into different income tax slabs. You have to file your annual Income Tax Returns (ITRs) on the basis of the tax slabs. But, did you know that prudent investment decisions can save income tax for salaried employees? If you are looking to save tax, you can choose a variety of tax saving investment options, like, insurance and savings instruments.

Before knowing more about the investment options to save income tax for salaried employees, you must understand your income tax category, under the new tax regime for FY 2025-26 (AY 2026-27). You can refer to the chart given below:

Rate	Tax Slab for FY 2025-26
Zero	Up to ₹4 lakh
5%	₹4 lakh to ₹8 lakh
10%	₹8 Lakh to ₹12 lakh
15%	₹12 lakh to ₹ 16 lakh
20%	₹16 lakh to ₹20 lakh
25%	₹20 lakh to ₹24 lakh
30%	₹24 lakh

According to the new budgetary provisions, you can also choose a new tax slab by foregoing standard deductions and exemptions, like deductions under Section 80 C of the Income Tax Act, Leave Travel Allowance (LTA), conveyance allowance, relocation allowance, interest on housing loan etc. for FY 2025-26, the new tax regime are entitled to a full tax rebate of up to ₹60,000 under Section 87A if their net taxable income does not exceed ₹12,00,000. This results in zero tax liability for taxpayers within this income bracket.

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Investment tips for salaried employees

To save income tax for salaried employees, you can choose to invest in:

Life insurance: Life insurance policies provide financial protection to your family in the case of an unfortunate event. Alongside, a life insurance policy will also allow you to save on taxes. You can claim tax exemptions for making premium payments under Section 80C of the Income Tax Act.
Medical Insurance: Having a health policy can also provide tax benefits. You can claim deductions up to Rs 25,000 on a health insurance policy under Section 80D of the Income Tax Act.
Unit Linked Insurance Plans (ULIPs): ULIPs provide the dual benefit of market-linked returns along with the protection of life insurance. Investments under the scheme provide tax benefits under Section 80C.
Equity Linked Savings Schemes (ELSS): These are also known as tax saving mutual fund schemes. ELSS have a minimum lock-in period of 3 years. These instruments invest primarily in equity funds and generate high returns. Investment in ELSS can help save income tax for salaried employees under Section 80C.
Tax Saving Fixed Deposits: As a new employee, you can save tax by investing in tax saving fixed deposits, which have a lock-in period of 5 years. Along with high interest payouts, these investments also allow tax savings.
Post office time deposits: 5-year POTD qualifies for section 80C, and provides attractive interest rates of up to around 7.5%. These provide tax benefits under Section 80C.
National Savings Certificate (NSC): Investment in NSC can help save income tax for salaried employees under Section 80C. You can choose to invest in NSC's with lock-in periods of 5 years.
Employee Provident Fund (EPF): As per rules, salaried employees are required to contribute 12% of their basic salary and Dearness Allowance (DA) in their EPF account. Contributions to EPF are tax free, and can help save income tax for salaried employees.
Public Provident Fund (PPF): PPF is a government-backed, long-term investment and savings scheme which allows tax exemptions under Section 80C. These have an EEE - Exempt-Exempt-Exempt status. minimum tenure of 15 years, and provide interest payouts of up to 7.1%.
Sukanya Samriddhi Account: You can avail tax deductions up to a maximum of Rs 1.5 lakh in a financial year for making deposits in the Sukanya Samriddhi Yojana for your girl child. This is a long-term investment, with the benefit of compounding.
National Pension Scheme (NPS): This is a government-backed pension scheme for the employees of the public, private and unorganised sectors. Under Section 80C, you can claim deductions up to Rs 1.5 lakh, in any given financial year, for making contributions towards the scheme.

Conclusion

Thus, as a new employee, you can choose to invest in a wide variety of options to claim tax benefits. Among these options, ULIPs can be the best alternative to help save income tax for salaried employees. You can select the which allows tax benefits for making premium payments under Section 80C. What’s more the amount received on maturity or as death benefit is also exempt from tax under Section 10D. You can also opt for partial withdrawals to meet any emergency requirements. The also adds to your savings through loyalty and wealth boosters.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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