Top 5 Tax Saving Tips for Salaried Employees

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As we head to the last quarter of the financial year, saving Income Tax through fruitful tax saving investments is running on the mind of every salaried individual. Though most of us already have opted for different tax saving options which offers maximum tax savings, yet there are some tricks of trade which we might’ve missed out. Hence in this article, we shall highlight the top 5 tax saving investment options for salaried employees.

Section 80C of the IT Act 1961, is the most lucrative tax saving section for the salaried class. You can claim up to Rs. 1.5 Lakh deduction from your gross taxable income by investing an equivalent amount in ELSS or other eligible 80C investment options.

Let’s discuss the different types of income tax saving options through Sec 80C

Life Insurance – This investment avenue is a wise option since it offers dual benefits – covers the risk of your life and the premium paid for regular life insurance policies qualifies for tax deduction under Sec 80C upto the extent of 10% of the sum assured.

Public Provident Fund (PPF) – Contributions made towards PPF offers tax benefits of upto
Rs 1.5 Lakh under Sec 80C. The interest earned and received during the time of maturity is tax free. Though impressive, a lock-in of 15 years; where once a year withdrawal, from the 7th year onwards with certain conditions makes it less favorable for investors with shorter investment time horizon.

Fixed Deposit for 5 Years – Deposits in these are exempt from taxation up to Rs 1.5 lakh, under Section 80C of the Income Tax Act, 1961. However, minimum lock-in in these fixed deposits are for 5 years for income tax planning.

National Savings Certificate – This is a fixed income investment scheme which offers tax benefits of upto Rs 1.5 Lakh under Sec 80C and can be opened at any Post Office by submitting the KYC. The maturity duration is either for 5 or 10 years and interest payment is in range of 7.5 to 8%.

Equity Linked Savings Scheme (ELSS) – ELSS mutual fund is one of the most preferred income tax saving options in India for two major reasons, (i) Its equity based, (ii) It has the shortest lock-in period comparatively. Being market linked, ELSS are high on risk parameter however; they have the potential to offer better returns.

An important income tax saving tip is, investments in ELSS can be made in small proportions through SIP instead of paying a lump sum.

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