Tax-saving options for salaried individuals

Every salaried individual contributes towards the taxpaying by the filing of Income Tax returns. Tax filing authorities calculate details of your income for the particular financial year. After deducting the standard slabs of income allowed, taxable income is worked out. Next comes the option to invest in various schemes and save tax in various proportions. Let us discuss the tax saving schemes for salaried individuals and insights on how to save tax.

• Tax-saving schemes
• National savings certificate

This plan offers an interest rate of 7 to 8% PA but may vary according to the number of years; we lock in the amount. The lock-in period is 5 years. Some plans also offer a lock-in period of 8 years.

• NPS

National Pension Scheme earns you a good interest rate of 12% to 14% PA, but the lock-in period is till retirement. This is also a safe way of investment. This is a good plan since, in the private sector after retirement, no pension funds are available. You also get tax benefits for this investment.

• PPF

This plan provides an interest rate of 7% to 8% pa. The lock-in period for this option is 15 years.

• Mutual fund plans and ULIP plans

Mutual fund plans earn you a good rate of interest from 15% to 18% PA. Here the lock-in period is 3 years. Mutual funds are subject to market risks.  If you are planning for ULIP funds, which is also an attractive investment option, then prefer the balanced fund option rather than the equity and debt funds as your returns will be guaranteed with less risk. This plan also provides the necessary health cover after retirement.

• How to save tax?
• Standard deduction option

Use the standard deduction option of Rs 1.5 lakhs from total taxable income to save tax and arrive at the figure for taxable income.

• Health insurance premiums

Paying health insurance premiums can benefit you from paying taxes. The premium amount is deducted from the taxable income and your payable tax is reduced.

• Rebate on house rent

From the payable tax calculation, you can deduct the monthly house rent with supporting documents of payment receipt from the house owner.

• Housing loans

EMI that you repay, if you are opting for housing loan can be considered for tax saving purpose.

• Employee contribution to Provident Fund

Employee contribution to provident fund gets tax rebate. An employee earns interest on the amount deposited into the provident fund at the interest rate of 8.5% PA. After retirement, they get a lump sum amount.

• Education expenses and school fees

You get exemption on income tax by submitting school fee receipts and children’s education expenses.

• Donations for charitable institutions

Donations paid to charitable institutions can be considered for tax saving purpose.

Try and start investing as early as possible in the financial year, so you get more benefits from your investments.