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 market, 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. You can refer to the chart given below:
|Tax slab||Individual taxpayer below the age of 60 years|
|Zero||Up to Rs 2.5 lakh|
|5%||Rs 2,50,001 to Rs 5,00,000|
|20%||Rs 5.00,001 to Rs 10,00,000|
|30%||Above Rs 10 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.
Investment tips for salaried employees: To save income tax for salaried employees, you can choose to invest in:
1. Life insurance: Life insurance policies provide financial protection to your family in the case of an unfortunate eventuality. Alongside, a life insurance policy will also allow you to save taxes. You can claim tax exemptions for making premium payments under Section 80C of the Income Tax Act.
2. 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.
3. Unit Linked Insurance Plans (ULIPs): ULIP 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
4. 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.
5. 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.
6. Post office time deposits: These deposits have a lock-in period of 5 years, and provide attractive interest rates of up to 8.5%. These provide tax benefits under Section 80C.
7. 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 and 10 years.
8. 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.
9. Public Provident Fund (PPF): This is a government-backed, long-term investment and savings scheme which allows tax exemptions under Section 80C. These have a minimum tenure of 15 years, and provide interest payouts of up to 8%.
10.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.
11.National Pension Scheme (NPS): This is a government-backed pension scheme for the employees of public, private and unorganised sector. 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 Invest 4G plan from Canara HSBC Oriental Bank of Commerce Life Insurance, 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 Invest 4G plan also adds to your savings through loyalty and wealth boosters.
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