Tax Planning Tips for Salaried Employees

Understanding the tax implications on salaries is a crucial thing as one can know how much he is going to pay as taxes. No one wants to pay a significant amount in taxes, and this is where tax planning can help.

It is crucial to learn about tax-saving options for salaried people, as they can help one save a significant amount. By availing of these options, individuals can use their hard-earned money for the benefit of themselves and their family. In this article, we shall take you through the top 10 tax investment options that will save you taxes!

Top 10 Tax Saving Options for Salaried in 2024

No one wants to hand over money that they’ve earned over to anyone else. You deserve what you’ve worked for. Here are some easy ways to make sure that your salary stays with you and doesn’t get turned over as tax to the government.

List of all Tax Saving Options for Salaried:

• ELSS
• NPS
• Employee Provident Fund
• Tax Saving FD
• HRA
• LTC
• Public Provident Fund
• Retirement Benefits (Gratuity)
• Health Insurance Premium
• Life Insurance Premium

Let us look at these options in depth and understand how it saves income tax for a salaried person.

1. Equity Linked Saving Scheme: Those who are looking for mutual fund investment with a tax benefit must consider ELSS. It is one of the best saving schemes for salaried individuals, as it gives them a deduction under section 80C. Besides, the income is taxable only above the threshold limit of ₹1 lakh.
2. National Pension Scheme: If you are a low-risk individual, the NPS will suit your requirements. It is a safe investment scheme by the Central Government, which allows salaried individuals to save tax by claiming a deduction under section 80C. You can also save additional tax by way of deduction under section 80 CCD.
3. Employee Provident Fund: EPF is the most popular salary tax planning tool for employees. It is a retirement fund in which the employee and employer contribute 12% of the salary towards the fund. Employees can save taxes from this fund as the contribution and the interest earned are both tax-free.
4. Tax-Saving FD: As salaried individuals, you can also opt for tax-saving fixed deposits as a part of the tax planning. You can save on taxes by claiming a deduction under section 80C. It has a 5-year lock-in period and offers a guaranteed return on the investment.
5. House Rent Allowance: Individuals living in rented houses can take advantage of the HRA to reduce their taxes. Though the HRA is a part of the salary structure, it is exempt under section 10 (13A) when the specified conditions are fulfilled.
6. Leave Travel Concession: Under LTC, the employee gets a tax exemption when he goes on a journey. An employee can get a tax deduction for the amount he spends on travel costs such as bus or rail fare.
7. Public Provident Fund: For those looking for tax-free returns, the PPF is a wonderful investment option. It offers tax benefits, allowing individuals to accumulate corpus for retirement. It falls under the exempt-exempt exempt category, allowing salaried individuals to gain maximum benefits.
8. Retirement Funds (Gratuity): Gratuity is a benefit that salaried employees receive on retirement, resignation, death, or superannuation when they have completed 5 years with the employer. As per the tax rules, gratuity up to ₹20 lakhs is exempt from tax.
9. Health Insurance Premium: A health insurance premium offers financial protection to the insured and his family in case of medical emergencies. Besides, the premium paid is deductible under section 80D for individuals. Therefore, it assists in reducing income tax for salaried employees.
10. Life Insurance Premium: Life insurance is another beneficial tax-saving option for salaried people. It provides assistance in case of the unfortunate death of the insured and the premium paid offers tax benefits also. You can claim a deduction of the premium under section 80D and reduce your tax liability.

Some additional tips:

1. Take a good look at Section 80C: This section gives enough leeway to employees to reduce their tax liability. By taking a good long look at this section, individuals can formulate ways to increase take-home salary and legally reduce taxed amounts.
2. Make proper investment plans: By investing on Life Insurance plans, savings plans and Public Provident Funds (PPFs) you can claim tax exemptions on legal grounds. Investment plans also depend on personal financial goals, risk profile, and personal income. However, you should consult a financial planner on this matter before you make a final decision yourself. Tools such as the Life Insurance Calculators should come in handy here.
3. Make the most of secondary options: Options such as tax-savings mutual funds and ULIPs are excellent ways of saving tax, if you are the risk taking type. If not, PPFs and NSCs are also viable options. Even pension plans qualify for tax exemptions.
4. Take a Home Loan: By taking a Home Loan you can claim tax exemption by providing documents of proof regarding principle repayment of the loan.

Also read: Tax saving investments can help achieve goals.

File ITR for Tax Planning for Salaried Employees

All salaried individuals are required to file their income tax returns showing their income earned from salary and other sources, if any. While salaried employees enjoy the benefits of tax exemption with the help of the options mentioned above, it is necessary to show the details in the income tax returns.

Individuals must provide documents proving their income, deductions, allowances, etc. In addition to other documents, individuals must provide Form 16 and Form 26AS for filing ITR.

• Form 16: Form 16 is the TDS certificate issued by the employer, which contains the details of the tax deducted from the salary. It is one of the most common documents required at the time of filing returns.
  All employers must issue form 16 to the employees showing how much tax was deducted from their salary and submitted to the government.
• Form 26AS: Form 26 AS is another TDS and TCS certificate that reflects the amount of tax deducted or credited from the taxpayer’s other sources of income. It also shows the details of advance or self-assessment tax, high-value transactions, etc.

To know more about Term Insurance, browse the website for various Term Plans offered by PNB MetLife.

Conclusion

If you are a salaried individual in India, paying attention to financial planning for salaried employees from the very start is highly recommended. You can explore and compare various tax-saving schemes and choose the one that provides you the maximum benefit along with considerable tax savings.
Opting for investment schemes that qualify for deductions under section 80C is a wise thing to do. Besides, if you have risk capacity, investments like ULIPs, tax-saving mutual funds, etc., are a good choice.

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