There are several tax-saving instruments available for company employees in India to reduce their taxable income and lower their tax liability. These include:
1. Public Provident Fund (PPF)
PPF is a long-term investment option that provides tax benefits under Section 80C of the Income Tax Act. The investment made in PPF is eligible for deduction up to INR 1.5 Lakhs per financial year. The interest earned on PPF is also tax-free. PPF has a lock-in period of 15 years, and the maturity period is 15 years.
2. National Savings Certificate (NSC)
NSC is another long-term investment option that provides tax benefits under Section 80C of the Income Tax Act. The investment made in NSC is eligible for deduction up to INR 1.5 Lakhs per financial year. The interest earned on NSC is also tax-free. NSC has a lock-in period of 5 years, and the maturity period is 5 years.
3. Equity-Linked Saving Scheme (ELSS)
ELSS is a type of mutual fund that provides tax benefits under Section 80C of the Income Tax Act. The investment made in ELSS is eligible for deduction up to INR 1.5 Lakhs per financial year. The returns from ELSS are also taxed at a lower rate of 10% if held for more than 3 years. ELSS has a lock-in period of 3 years, which is the lowest among all tax-saving options.
4. National Pension System (NPS)
NPS is a retirement savings scheme that provides tax benefits under Section 80CCD(1B) of the Income Tax Act. An additional deduction of INR 50,000 can be claimed over and above the INR 1.5 Lakhs limit under Section 80C.
5. Senior Citizen Savings Scheme (SCSS)
SCSS is a savings scheme for senior citizens that provides tax benefits under Section 80C of the Income Tax Act. The investment made in SCSS is eligible for deduction up to INR 1.5 Lakhs per financial year. The interest earned on SCSS is also tax-free. SCSS has a lock-in period of 5 years, and the maturity period is 5 years.
6. Sukanya Samriddhi Yojana (SSY)
SSY is a savings scheme for the girl child that provides tax benefits under Section 80C of the Income Tax Act. The investment made in SSY is eligible for deduction up to INR 1.5 Lakhs per financial year. The interest earned on SSY is also tax-free. SSY has a lock-in period of 21 years, or until the girl child turns 18, whichever is earlier.
It’s always advisable to consult with a professional tax consultant or a chartered accountant for proper guidance and to choose the best tax-saving instruments that suit your financial needs and goals.
In summary, company employees in India have several tax-saving instruments available such as PPF, NSC, ELSS, NPS, SCSS, and SSY which can provide tax benefits under Section 80C of the Income Tax Act and help in reducing their taxable income and lower their tax liability. These instruments also provide long-term savings and investment options with different maturity periods and returns, and it is recommended to consult with a professional before making a choice.
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