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Got Salary Hike Recently? Employees Can Make These Investment Plans to Save Tax

Got Salary Hike Recently? Employees Can Make These Investment Plans to Save Tax

Tax-saving Investment Plans: After facing job loss and salary deductions during COVID pandemic, now many employees are getting hike in salary, and it certainly brings cheers to them as they will get more money in hand and get relief amid high inflation. While getting more take-home money, the salaried -individuals must note that they will also have to pay more tax, if all the available tax-saving avenues are not explored. In order to avoid paying more taxes due to the hike in salary, the employees must try these investment plans.Also Read – Raining Perks And Bonanza For Employees In One Of Tech’s Biggest Companies. Details Here

National Pension System

One of the tax-saving investment plans is National Pension System. This scheme offers an additional tax deduction over and above the Rs 1.5 Lakh per year under Section 80C. A government-backed retirement savings scheme, National Pension System offers asset classes such as equity, government securities, corporate debt and alternative investment funds. Also Read – Good News For Pensioners: Centre Announces Hike in Dearness Relief For This Category of Retired Employees

The National Pension System offers two different accounts — Tier I and Tier II. One will have to mandatorily open a Tier I account to invest in the NPS. However, Tier II is a voluntary account. Also Read – PAN Now Made Mandatory In All These Bank Transactions Or Deposits/Withdrawals. Details Here

The employees must note that National Pension System offers a tax deduction of up to Rs 50,000 per financial year under Section 80CCD(1B) of the IT Act. One can also claim up to 10 per cent of their salary (Basic Salary + Dearness Allowance) if the employer contributes to the NPS in the employee’s name.

Public Provident Fund

In case you fall within the taxable bracket after a salary hike, you must choose investments that qualify for the Section 80C tax deduction. Some can invest in the Public Provident Fund (PPF) or the National Savings Certificate, which offer higher interest rates than bank FDs.

National Savings Certificate

The investors must note that in the case of National Savings Certificate (NSC), the interest earned is not paid out to investors but gets reinvested and accumulated. The interest in the first four years of the investment qualifies for the Section 80C tax deduction as its reinvested.

Equity Linked Saving Schemes

Another option to look for tax-saving scheme is Equity Linked Saving Schemes (ELSS), through which one can invest predominantly in equity and equity-linked instruments. The individuals can invest in ELSS through the Systematic Investment Plan (SIP). It Notably, the long term capital gains (LTCG) from ELSS up to Rs 1 Lakh are tax-free.

Voluntary Provident Fund

The salaried individuals can also look for investing in the Voluntary Provident Fund (VPF) as this is a safe investment option, and the contribution qualifies for the Section 80C tax deduction.

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