Tuesday, July 5, 2022

Are You get salary hike know how to save tax with many invest scheme including…

Salary hike for salaried employees is nothing less than a pleasure, it provides some relief to check inflation. Also, the way of saving is also visible, although higher salary increase can keep you in the tax net. In such a situation, if you want to avoid deduction of tax or paying more tax in your monthly salary, then you should first invest in tax saving instruments.

Here are some investment options for you, in which you can save more tax money by investing. Let us know which schemes are tax-saving by investing in them.

NPS
If your salary has increased, you can opt for National Pension System (NPS) to save you tax based on your risk tolerance. It provides additional tax deduction of over Rs 1.5 lakh per annum under section 80C. It is a government-run savings scheme that offers assets such as equity, government securities, corporate debt and alternative investment funds.

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On the other hand, NPS offers a tax deduction of up to Rs 50,000 per financial year under Section 80CCD(1B) of the IT Act. Also, if the employer contributes to the NPS in the name of the employee, one can claim up to 10 per cent of his salary (Basic Pay + Dearness Allowance).

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PPF
PPF also comes under Section 80C tax deduction, under which investors can invest in Public Provident Fund (PPF) or National Savings Certificates, which offer higher rate of interest than bank FDs. In this scheme, tax can be deducted under section 80C of income tax.

NSC
In case of National Savings Certificate (NSC), the interest earned is not paid to the investors but gets reinvested in it. The interest on NSC is exempted under Section 80C during the first four years of investment. However, NSC interest in the fifth year on maturity is taxed as per your income tax net. Explain that the government revises the interest rates on small savings schemes like PPF and NSC every quarter. PPF currently offers an interest rate of 7.1 per cent and NSC an interest rate of 6.8 per cent for the April to June 2022 quarter.

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ELSS
One can also invest in Equity Linked Savings Schemes (ELSS), which primarily invest in equity and equity linked instruments. It has a lock-in period of three years and is eligible for section 80C tax deduction. In addition, long-term capital gains (LTCG) from ELSS up to Rs 1 lakh are tax-free. LTCG with ELSS above Rs 1 lakh will attract 10 per cent tax.

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PF
Salaried employees can choose to invest in Voluntary Provident Fund (VPF) in addition to the mandatory Employees Provident Fund (EPF) contribution. It is a safe investment option, and the contribution is eligible for section 80C tax deduction. VPF currently offers an interest rate of 8.1 per cent for the financial year 2021-22. At present interest received on contribution of more than Rs 2.5 lakh to EPF or VPF is taxable at applicable tax slab rates. Along with this, TDS of 10 percent will also be deducted.

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