Plan your taxes with tax saving options for the salaried in 2020-2021
As an income-earning citizen of India, paying taxes is both obligatory and imperative. Your tax payments help the government with its development efforts. To ensure you are not burdened with tax payments, the government provides relief by offering various tax saving options for salaried employees. If you are one, keep reading to find out different options to maximise your tax savings.
Below are some tax benefits salaried employees in India can enjoy
House Rent Allowance or HRA is a component of your salary. If you live in rented facilities, you can claim HRA tax benefits under section 10(13A) of the Income Tax Act, 1961. Tax saving benefits on HRA is based on the lowest of the three criteria mentioned below:
Your employer will provide you with the LTA to cover your travel expenses within India. Salaried individuals can claim LTA twice in a slot of four years, and the government determines the slot. The current slot for LTA is 2018-2021.
EPS is another tax saving option for salaried employees. Under the EPF scheme, the employer and the employee contribute a total of 12% equivalent salary to an interest-generating Employee Provident Fund. The principal amount and interest on EPF deposits are tax-free for salaried individuals.
While discussing tax planning for salaried employees, we must also mention the various tax-saving options available under section 80C of the Income Tax Act of 1961, which enables them to claim deductions of up to INR 1.5 Lakh per annum.
ELSS Equity Mutual funds are tax-saving investments that salaried employees in the 30% tax slab to save up to INR 46,800 in tax payment. ELSS has a 3-year lock-in period, the lowest among all tax-saving schemes.
PPF is a tax-free investment vehicle for salaried individuals. It comes with a lock-in period of 15 years, provides guaranteed returns, and the amount invested, interest amount, and maturity amount is entirely tax-free.
NPS is another tax-saving option for salaried employees. Besides 80C benefits, you also get an additional tax deduction benefit of INR 50,000 on NPS under section 80CCD.
Your Life Insurance premium payments are tax-deductible, so long as the premiums paid are less than 10% of the total sum assured.
tax planning for salaried employees must also include health insurance. Based on your and your parent’s age, you can claim deductions of INR 25,000 to INR 100,000 on premiums paid for dependent family members.
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With so many tax-saving options for salaried individuals, you should choose that that help reduces your tax-out significantly. Ensure your investments align with your financial plans. Happy Investing.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.