Do you want to maximise your take-home income? Saving on taxes is one great way to do it.
Tapping in the concept of tax planning for salaried employees helps optimise your tax liabilities and increase the potential income tax saving.
For this, it is essential to know the tax slab, the various income tax deductions and tax saving options for salaried employees through which you can calculate your income tax correctly.
However, to simplify the process of computing taxes, you can use income tax calculators available online. And, to know some of the tax-saving options for salaried people, keep reading this article.
What Are The Various Tax-Saving Options For Salaried Employees?
1. Employee Provident Fund (EPF)
It is a widely used instrument to save taxes for salaried individuals in India.
In this, the employees have to contribute a portion of their salary towards EPF, which is eligible, for tax deductions under section Section 80C of the Income Tax Act.
The maximum annual deduction allowed under this section is ₹1.5 lakh.
2. Public Provident Fund (PPF)
PPF is a long-term Indian government saving scheme that offers appealing interest rates and tax benefits to salaried employees.
Like EPF, the contribution towards the PPF is eligible for tax deductions with a maximum annual limit of ₹1.5 lakh under Section 80C.
Moreover, the interest earned, i.e. 7.10%, for the financial year 2023-24 in India and the maturity amount are tax-free.
3. National Pension System (NPS)
The National Pension System (NPS) is a government-sponsored retirement savings scheme that allows salaried individuals to contribute towards their pension fund.
NPS is eligible for tax deductions under Section 80CCD(1) and 80CCD(2) of the Income Tax Act, which encourages individuals to contribute 10% of their salary.
It has generated an average return of around 9-12% since 2021, which makes it an attractive choice for many.
4. Life Insurance Premiums
Investing in life insurance is an essential aspect of financial planning that gives financial security to the family after the demise of policyholders.
But its benefit isn’t limited to the death maturity amount; the premiums paid towards life insurance policies are also eligible for tax deductions up to ₹1.5 lakh per year under Section 80C.
Click here to learn more about tax benefits on life insurance.
5. Health Insurance Premiums
Investing in health insurance is essential to combat rising medical costs. However, health insurance premiums paid for the self, spouse, children, and parents are eligible for tax deductions under Section 80D.
It encourages individuals to secure adequate health insurance coverage while claiming tax deductions of up to ₹25,000 for health insurance premiums paid.
These deductions may vary based on the age and category of the insured individuals.
6. Home Loan Interest
If you are the person who availed of the home loan, then interest on the paid loan is eligible for the tax deduction in Income Tax Act under Section 24(b).
The maximum deduction for a self-occupied property on home loan interest payments is ₹2 lakhs per year.
It encourages individuals to invest in real estate while reducing their taxable income.
7. Education Loan Interest
Having an education loan can be a significant financial burden on salaried employees.
However, the interest you paid on education loans for yourself, your spouse, children or even a student for whom you are the legal guardian is eligible for tax deductions under Section 80E of the Income Tax Act.
This deduction is available for a maximum of 8 years or until the interest is fully paid, whichever is earlier, without any upper limit.
Also, it gives a lot of relief to the individuals to finance higher education for themselves and the people specified under these deductions.
Conclusion
Understanding the different avenues of tax saving for salaried, helps individuals reduce their tax liabilities while securing financial security.
However, it is also essential to access your financial goals and plan accordingly. For this, you should consult a tax professional or financial advisor who will assess your tax-saving needs and give you the right advice.
It is how you can enhance your finance game and make the most of your hard-earned income.
