What are Some of the Best Tax Saving Options for Salaried Employees?

Under the Income Tax Act, 1961, every individual earning an income must pay their due taxes to the Indian government. The income can accumulate from salary, house rent, commissions, professional fees, bank interest, etc. For salaried employees, their employees collect the tax on their behalf from their salaries and give it to the Income Tax (IT) Department. From the IT department, this tax gets remitted to the central government.

While the central government relies on income tax for a major share of its revenue, it also encourages people to save tax and find the best tax-saving options. The best tax-saving options include tax-saving funds and investments. Here are the five best tax-saving investments for you to save tax every year.  

• Life Insurance

Life insurance is one of the best tax-saving investments available. Under section 80C of the Income Tax Act, you can get back the premiums paid towards the life insurance plan of up to ₹1.5 lakh in a year. Not only does life insurance is a tax-saving instrument, but it also provides financial coverage to the family members of the policyholder on their demise. This financial coverage is in the form of a death benefit. The death benefits are exempt from tax per Section 10(10 D) of the Income Tax Act.

• Unit-Linked Insurance

Unit-Linked Insurance Plans or ULIPS are among some of the best tax-saving plans too that also provide a life cover. Here as well, under Section 80C of the Income Tax Act, you can get back up to ₹1.5 lakh from the premiums paid towards the life insurance component. ULIPs are a wealth-creating and tax-saving investment, so their dual nature is ideal for creating long-term wealth and saving tax along the way. Moreover, even the maturity benefit you receive under ULIPs are exempt from tax deduction per Section 10(10D).

• Health Insurance

Not only does health insurance secure you and your loved ones in the face of a medical emergency, but it also works as one of the best tax-saving plans. According to section 80C of the Income Tax Act, the premiums you pay towards the purchase of a health insurance policy are returnable. You can claim it back provided the threshold does not cross ₹25,000 if you buy the health insurance plan for yourself or your spouse and children. Or ₹50,000 if you buy the health insurance plan as a senior citizen/ for your parents.

• Employees Provident Fund

The Employees Provident Fund (EPF) is a retirement fund or scheme managed by the Employees Provident Fund Organization. Under this scheme, both the employee and employer pay a specific percentage (up to 12% of the former’s salary) in equal parts towards the fund up to a certain date. This contribution grows over time, and the accumulated fund value with interest earned is both exempt from tax deductions. The EPF is one of the most popular tax-saving funds available.

• Public Provident Fund

The Public Provident Fund or PPF is another one of the best tax-saving options for salaried persons. This is a retirement scheme, too; however, it is under the direct control of the Indian government. It is a long-term savings avenue that allows for investments as less as ₹500 and gives profitable returns by the end of its tenure. The maturity amount you receive after the tenure ends and the interest both are exempt from tax deductions. Note that the maximum amount you can invest in the PPF is ₹1.5 lakh.

To conclude: 

The Indian government relies on taxpayers for revenue collection and the smooth functioning of the country. However, it never discourages their earning citizens from saving tax and enables them to save tax wherever possible through various tax-saving funds, investments, and options. Apart from the five avenues mentioned, there are multiple other best tax-saving options you can select, salaried or otherwise. To know more about term plan, term insurance and long term savings visit PNB MetLife website.

The income tax is levied on all earning individuals who fall under a taxable income bracket. The income tax is paid to the Government of India and is charged annually. However, there are several tax deductions and exemptions that you can claim to lower your tax liability. The Income Tax Calculator helps you ascertain your tax output for a financial year based on your taxable income. This can help you plan well and save tax using the tax-saving deductions and exemptions, if possible.