Tax Saving Options For Salaried People: The first month of the new financial year is about to end. In the last month of every financial year, many people see an option to save tax, but at the last moment, many mistakes are made in haste. Due to these mistakes, sometimes there is a low return on investment and sometimes the financial burden is increased. In such a situation, tax planning is necessary from now on. Talking of salaried people, they have many options to save tax, including NPS, PPF, ELSS. Options like HRA and Health Insurance Premium are the main ones. Salaried individuals can save income tax under the provisions of the Income Tax Act 1961.
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Great option to save tax
- Employees’ Provident Fund (EPF) : EPF is a very popular way to save tax among salaried individuals. Under this scheme, both the employees and the employees contribute 12% of the salary of the employer to the Employee Provident Fund. On this, the employee gets a special rate of interest, which is decided by the central government. Under section 80C, the amount of tax deducted in EPF (maximum limit of 1.5 lakh rupees) is paid, on which the benefit of tax deduction is given. Apart from this, no tax will have to be paid on interest up to 2.5 lakh rupees and no tax has to be paid on the fund corpus as well.
- Public Provident Fund (PPF): PPF is a great choice for salaried person. Through this, corps and guaranteed returns can be ensured for retirement. The tax deduction is paid on the contribution made to the PPF and there is no tax on the outstanding amount along with the interest.
- Equity Linked Savings Scheme (ELSS): ELSS is one of the best tax saving options for salaried individuals. Investments made under this scheme get deduction under Section 80C of Income Tax Act (maximum Rs 1.5 lakh). It offers comparatively higher returns as it is an equity-linked savings scheme. This is a mutual fund on which tax benefits are available.
- National Pension Scheme (NPS): Talking about long term saving options, NPS is very popular among salaried people. Those who are planning for early retirement and have low risk appetite, mostly give priority to NPS. NPS offers higher returns than PPF and fixed deposits, but it does not provide much tax benefit. Salaried Individuals can claim tax deduction under Section 80 CCD (1) at a contribution equal to 10% of the basic salary. Although the limit of deduction under this is fixed at Rs 1.5 lakh under section 80 CCE, that is, you can claim tax deduction at a contribution equal to 10% of the basic salary per annum, but this amount cannot exceed Rs 1.5 lakh per annum.
- Tax Saving FD: Tax saving FD is also popular among salaried people. This is such an option of FD under which tax can also be saved. Tax deductions can be claimed under Section 80C on investments made up to Rs 1.5 lakh. It has a lock in period of 5 years due to which it is a safe option for salaried employees. In this, the return on investment is safe but taxable. It has to be shown in ITR as income from other sources and tax has to be paid at the applicable rates.
- Life Insurance: Tax savings can also be made by giving financial security to your family in an uncertain environment. By buying life insurance, not only the financial needs of the family can be secured but tax benefits can also be achieved. Under section 80C, you can save annual tax on premiums up to Rs 1.5 lakh. Apart from this, death benefits or survival benefits are also tax exempted under section 10 (10D).
- Health Insurance Premium: Health services are becoming more and more expensive by the day. In such a situation, health insurance must be taken. Through health insurance, you can not only compensate for incidental expenses but can also get tax benefits. You can avail tax deduction under section 80D on the premium paid for health insurance. Under this provision, tax benefits can also be taken on the premium of health insurance of your spouse, dependent children and parents. Maximum deduction of Rs 1 lakh can be taken under section 80D.
- House Rent Allowance (HRA): A part of the salary structure of the employee consists of House Rent Allowance (HRA). Those who are living in rented houses can take tax benefits. Under the Income Tax Act, if a salaried employee is living in a rented house, then tax benefits can be taken under section 10 (13A). Taxable income is calculated by subtracting HRA from total income. However, if you are living in your own house and are not paying any rent then you will have to pay tax on HRA.
- Retirement Benefits (Gratuity): Gratuity is also an option to save tax. It is the amount given at the time of retirement, resignation, death or disability of the workers. This amount is received only when the worker has worked for at least 5 years in any one company. Tax exemption is given under section 10 (10) on the amount up to Rs 20 lakhs received as gratuity.
(Source: Max Life Insurance)