6 Ways Salaried Individuals Can Save On Taxes

It is mandatory to pay your taxes every year. However, the government has provided a few provisions to reduce the tax burden on the common man and woman. 

In this blog, we will explore all the tax exemptions available for salaried women in India.  

6 Ways To Save Tax on Salary

You can save on tax, increase your investments, and earn returns by following these easy tax-saving strategies.  

1. PPF (Public Provident Fund)

PPF or Public Provident Fund is a government scheme that allows individuals to save on tax while saving up for their retirement or other long-term plans. 

PPF is classified as an EEE investment, meaning the principal investment, interest, and accumulated amount are exempted from tax.

The salient features of PPF are as follows –

• Section 80C of the Income Tax Act allows PPF contributions to be claimed as tax deductions up to a maximum of Rs. 1.5 lakhs
• Account holders can deposit a minimum of Rs. 500 and a maximum of Rs. 1.5 lakh per year, and claim tax deductions for the whole amount
• PPF has a lock-in period of 15 years, after which the account holder can extend it for another 5 years
• Currently, the interest rate on PPF stands at 7.1% p.a.

PPF is a government-backed, high-return scheme that benefits the working individual in the long run.

2. Investments

There are several investment options available that provide tax-saving benefits along with increasing the portfolio of the employees. 

1. ELSS

ELSS offers high returns and has a lock-in period of just three years, making it a suitable saving instrument for your short-term goals.

Under section 80C, the principal amount invested in ELSS is exempted from tax up to Rs. 1.5 lakhs. Taxpayers can save up to Rs. 46,800 every year with ELSS.

2. NPS

National Pension Scheme is an incredible tax saving scheme under 80C with a deduction of up to Rs. 1.5 lakhs on the principal amount.

Per Section 80CCD (1), an employee can invest up to 10% of his/her salary tax-free. Both employees and employers can contribute to NPS.

3. Fixed Deposits

For investors who want to play it safe, tax-saving FD can be the right tax-saving investment.

Fixed deposit accounts that offer a tax deduction under Section 80C of the Income Tax Act are known as tax-saving fixed deposit accounts (FDs). 

An interest rate of 5% to 7% is applicable on the fixed deposits. The interest earned on this amount is, however, taxable.

4. Insurance

Insurance offers security during medical emergencies. Additionally, it offers tax benefits on the premium paid under section 80D of the Income Tax Act. 

The deductions offered are higher for senior citizens.

5. Education Loan

You might have taken a loan to support your education and now you are making monthly repayments to clear it. Did you know that the interest you pay on the loan is exempted from tax?

Section 80E allows tax exemption on education loans until the loan is repaid or 8 years, whichever is earlier. 

A statement from the financial institution showing how the loan was repaid in interest and principal is necessary for you to claim a deduction for the education loan. 

6. Home loan

Home loans are expensive. However, they are also tax-saving schemes that can aid you in maximizing your profits. You can save tax on the principal amount, interest, and more. To know about this, check out this article on home loan tax benefits.

Tax Exemptions For Salaried Individuals In India 

From FY 2012-2013, the tax exemptions have been made equal for all. Prior to this, women enjoyed more tax exemptions. 

Here’s a look at all the tax-saving schemes and the deductions allowed for individuals.

Final Thoughts

Every earning individual in India pays tax, in one form or another. However, the Indian government has offered several methods for the salaried individual to save on tax. 

Working professionals must take advantage of these tax exemptions to avail tax benefits in the short run and accumulate money to beat inflation in the future.