How to save income tax if a salaried employee?

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How to save income tax if a salaried employee?

What are the various methods to save taxes for a salaried employee? I have made investments in PPF and FD? Are these the best tax saving instruments?

Profile photo of bathiya Asked By: bathiya 1 replies 0 helpful answers Last Updated: 5 months ago
  • Profile photo of bathiyabathiya
    Participant

    What are the various methods to save taxes for a salaried employee? I have made investments in PPF and FD? Are these the best tax saving instruments?

  • Profile photo of Chetan ChandakChetan Chandak
    Moderator

    There are several ways in which a salaried employee can reduce his taxes.

    He should first take the benefits of various exempt allowance and perquisite included in his pay structure (ex. HRA, LTA, Phone reimbursement, car reimbursement, medical reimbursement, education allowance, conveyance allowance, uniform allowance,  health club facility, meal passes, etc). For availing these benefits/exemption you  will need to submit related bill to your employer within the time allowed.

    Apart from this you can also claim certain expenses related deduction under various sub section of section 80 (ex. Donation related deduction u/s 80G/ 80GGA/ 80GGC, Expenses on medical treatment of specified ailments u/s 80DDB, Maintenance and rehabilitation of disabled person u/s 80DD /80U, etc).

    If you still have any taxable income then you can look for investing in certain instruments which qualifies for exemption u/s 80C and 80 CCD. You have various options available under section 80C you can choose the one which best suits your investment objective. You can diversify your tax saving investment portfolio by investing some amount in ELSS which has very high potential to provide you the best return under this category, but remember that as its performance is linked to equity market it carries some risk as  well. But in general ELSS has provided minimum return of 12% plus over a period of 3-5 years which is highest under the 80C category.

    If you are not willing to take any risk and want to play safe while PPF is good option you can voluntarily contribute more towards your EPF which provides you 0.5% higher return than PPF.

    But investing in tax saving FD may not be a good option as interest you earn on it is taxable and if you fall in 30% plus tax bracket the post tax return will be only 5% which is very less.

    To know more on various options under 80 C please click

    https://www.hrblock.in/guides/income-tax-deductions-80c.aspx

    https://www.hrblock.in/guides/section-80ccd-tax-deduction-nps-apy.aspx

     

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