5 Tax Saving Tips for Rookies in Corporate World

2-August-2021 |

Your first salary reaching your bank account is a moment to cherish. It is something we all remember, and so is the pay slip that mentions the tax deduction. For most, it takes some time to get used to the tax deductions. Paying tax on income is a law in India and almost every other country. Using the taxes collected, the government plans its welfare and infrastructure spends. The Income Tax Act, 1961 governs the rules of taxation in India. While circumventing taxes is difficult, there are various tax-saving investments that can help you reduce your tax liability. After all, we slog to make a living, and every opportunity to save on your taxes is worth exploring. Money saved is money earned!

Tax*Saving Investment Tips

The golden rule is to start your tax planning at the beginning of the financial year and not wait until January every year. Out of several avenues that help maximize your income tax return by reducing your taxable income, here are some of the most popular ones:

 

  1. Life Insurance

    Adding a savings insurance (term plan) to your investment portfolio is always a good option. It acts as an insurance savings plan because it provides life cover and the premiums are eligible for tax* deduction under Section 80C (up to ₹ 1.5 lakh). Add-on riders# can help increase benefits. Moreover, when you are young, you can benefit from lower premiums. It also promotes the healthy habit of savings.

    You can also consider Unit-Linked Insurance Plans (ULIPs) that give you exposure to capital markets, along with the benefits of insurance savings plans.

  2. Medical Insurance

    Health plans are a great way to cover medical emergencies in the family and take care of rising medical bills. The premiums up to ₹ 25,000 (extendable to ₹ 50,000 for senior citizens) are eligible for deductions under Section 80D.

  3. Loans

    Home/Car/Education loans also fall under the umbrella of tax rebates. A home loan is a good tax-saving investment as it provides tax benefits on both the principal (up to ₹ 1.5 lakh under Section 80C) and the interest (up to ₹ 2.0 lakh under Section 24) payments. Also, if you have an active education loan, the interest amount falls under the tax deduction category under Section 80E. However, taking a car loan might not be a good idea at the start of your career.

    If you live in a rented apartment, you can also claim a house rent allowance (HRA) as part of your compensation. A part of your rent is exempted under Section 10 (13A). It helps reduce the overall tax liability.

  4. Investments

    Products such as Equity Linked Savings Scheme (ELSS) funds, National Pension Scheme (NPS), National Savings Certificate (NSC), Public Provident Fund (PPF), tax-saving long term bank deposits (5 years+), etc., are available for investment and the money invested can help reduce the tax burden under Section 80C (up to ₹ 1.5 lakh).

  5. Voluntary Donations

    Philanthropy never goes unnoticed, and when you do your bit, the Income Tax Department supports it. Donations made to certain organizations approved by the government, such as the National Relief Fund, are eligible for tax rebates. Some go up to 100%, and other donations may attract a rebate of 50%.

 

Depending on your situation and requirements, you can select suitable options from the above tax-saving tips. Always remember, your investment portfolio should be balanced with ample coverage for a rainy day.

 

Tata AIA Life Insurance offers a unique insurance savings plan, Diamond Savings Plan(UIN-110N133V02), that offers the benefits of a term insurance plan along with reductions in your tax liability.

You can choose the policy tenure to coincide with major life events, and be assured when the time comes, you will have much-needed liquidity.

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.

  • 2These bonuses are not guaranteed in nature. The Company may declare Cash Bonus rate annually in advance. The Cash Bonuses if declared, will be applicable provided all due premiums have been paid.

  • IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisor.