As the end of the financial year approaches, salaried employees in India often find themselves on the lookout for effective tax-saving strategies. Fortunately, the Indian government offers a range of tax-saving instruments to help reduce taxable income and increase take-home pay. In this blog, we'll explore some of the best tax-saving instruments available to salaried employees in India.
The Employee Provident Fund (EPF) is one of the most popular tax-saving instruments for salaried employees. It is a mandatory deduction from the employee's salary, with an equal contribution from the employer. The contributions made towards EPF are eligible for tax deduction under Section 80C of the Income Tax Act, up to a specified limit.
The Public Provident Fund (PPF) is a long-term, government-backed savings scheme that offers attractive tax benefits. Salaried employees can voluntarily invest in PPF and claim tax deductions under Section 80C on the invested amount. The interest earned and maturity proceeds are also tax-exempt.
ELSS is a tax-saving mutual fund that primarily invests in equities. It comes with a lock-in period of three years, and investments in ELSS are eligible for tax deduction under Section 80C. ELSS offers the potential for higher returns compared to other traditional tax-saving instruments.
The National Pension System (NPS) is a government-initiated retirement savings scheme that allows both salaried and self-employed individuals to build a retirement corpus. Salaried employees can avail additional tax benefits under Section 80CCD(1B) by investing up to a specific limit in NPS.
Many banks offer tax-saving fixed deposits with a lock-in period of five years. The interest earned on these deposits is taxable, but the principal amount is eligible for tax deduction under Section 80C.
Designed to benefit senior citizens, the SCSS is a government savings scheme with a tenure of five years, extendable once every three years. Salaried employees can invest in SCSS and claim tax deductions under Section 80C, up to the maximum permissible limit.
The National Savings Certificate (NSC) is a fixed-income investment scheme that comes with a lock-in period of five years. The interest earned on NSC is taxable, but the invested amount qualifies for tax deduction under Section 80C.
SSY is a savings scheme aimed at securing the financial future of the girl child. Parents or legal guardians of a girl child can invest in SSY and claim tax deductions under Section 80C. The scheme offers attractive interest rates and comes with a tenure of 21 years or until the girl child's marriage, whichever is earlier.
As a salaried employee in India, tax-saving instruments can play a pivotal role in optimizing your tax liability while securing your financial future. It's essential to carefully assess your financial goals, risk tolerance, and investment horizon before selecting the right tax-saving instruments. Additionally, consider diversifying your investments across various instruments to balance risk and potential returns.
Availment of ITC and Utilisation thereof under GST Law
Reversal of Input Tax Credit in GSTR 2 : All You Need to Know
-compressed.jpg)
