Friday, May 24

5 tax saving options for Salaried professionals in India

Professionals who are earning a decent salary are constantly looking for different investment options that can help them in wealth creation while also providing tax exemptions. Read on to know a few investment options that can provide you tax benefits.

Now that you have entered the tax season, you must be looking for different investment avenues where you can save taxes. There are different sections under the Income Tax act where you can save taxes up to a certain limit. In India we can save taxes by investing in multiple avenues, like health insurance, life insurance, pension funds and many more. You can also save taxes on your home loan interest and principal amount. Below are a few tax-saving investment options that you can include in your portfolio to get tax exemptions.

Employee Provident Fund (EPF):

One of the most popular ways of saving tax for salaried individuals is through EPF. This retirement fund comes under the Employee’s Provident Fund and Miscellaneous Act, 1952 and is presently managed by the Central Board of Trustees.

In this scheme, you and your employer can contribute up to 12% of your salary to this fund together. There is a fixed interest rate on the contributed amount; the accumulated funds and the interest earned from it are both tax-free.

Public Provident Fund (PPF):

PPF is a government-enabled saving scheme in which allows you to open an account with a minimum amount of Rs.500 and a maximum amount of up to Rs. 1.5 Lakh. Public Provident Fund is triple exempt investment plan(EEE). This means the principal amount, the premium, and the maturity amount are all tax exempted.

Life Insurance:

One of the best ways of saving tax is through investing in Life Insurance. It is the best way to save taxes while assuring financial security for future contingencies. You can choose from a wide range of life insurance policies to fulfil your tax saving goals. The premium paid towards the assured sum is tax exempted under Section 80C of the Income Tax Act. Even the maturity sum received as death or survival benefits are tax exempted under section 10 (10D) of the Income Tax Act.

National Pension Scheme (NPS):

This retirement pension scheme is for those individuals who wish to grow their wealth but have a low-risk appetite. It comes under the purview of the central government. NPS is considered a safe investment option and an excellent choice for salaried individuals to save tax. This is the best investment plan for your retirement while you can also save taxes towards your contribution under Section 80C. You can even get an additional deduction of up to Rs.50,000  under section 80CCD(1b)

Health Insurance

Our busy lifestyle, long working hours, unhealthy food habits and unpleasant environmental factors have given rise to chronic health conditions. Additionally, the increasing cost of healthcare services makes it very difficult to get a good health care service at an affordable rate. This is why it is necessary to have a health insurance plan for every family member. Health Insurance takes care of all the health care expenses if any member of the family falls sick. Health insurance also provides you tax benefits under Section 80D towards the premium you pay for your health insurance plan.

Other than these common plans, there are other tax-saving options such as ULIPs, tax-saving fixed deposit and ELSS. The plans mentioned above are a must for every salaried individual who wishes to have financial security and get tax benefits.