Tax Saving Investment Options Every Salaried Employee Should Know
From ELSS to PPF and NPS, here are the most effective tax saving investment options that help you build wealth while reducing your taxable income.
Why tax planning should be planned early
Tax planning is not a last minute exercise. When you start early you get enough time to compare instruments, understand lock in periods and align every investment with a clear financial goal. Spreading your investments across the year also keeps your monthly cash flow comfortable.
Under Section 80C you can claim deductions up to Rs 1,50,000 in a financial year. A few smart choices can help you use this limit fully while also creating long term wealth.
Best tax saving investment options
- ELSS mutual funds - Equity linked savings schemes carry the shortest lock in period of three years and have the potential to deliver inflation beating returns.
- Public Provident Fund - A safe, government backed scheme with a 15 year horizon and fully tax free maturity amount.
- National Pension System - An additional deduction of up to Rs 50,000 is available under Section 80CCD(1B) over and above the 80C limit.
- Life insurance and health insurance - Premium paid for eligible policies also counts towards your total deduction.
A simple way to get started
Start by listing the amount you need to invest, then divide it between a stable instrument such as PPF and a growth oriented option such as ELSS. Review the portfolio once a year and increase the contribution whenever your income rises.
Speak with a SEBI registered investment adviser to build a tax saving plan that fits your income, your goals and your risk comfort.
