Tax Saving Options For Salaried Employee In 2024

If you are just joining the workforce, tax planning is essential when it comes to reducing your tax liability. For salaried individuals, knowing how to invest money in one’s twenties and thirties can be the difference between financial prosperity and hardship in one’s retirement age. There are a slew of tax saving investments in the market currently. For salaried people, knowing where to put their money can help reduce their tax liability by the end of the financial year. Here are a few tax saving investments to consider putting your money in.

Savings Investment Plans

A traditional endowment life insurance provides you with a maturity and death benefit. The difference between pure life insurance and a savings plan is that you get a return on investment with the latter such that you can meet your financial goals in the future. Savings plans allow you to save money in a systematic long-term manner, which is essential when it comes to achieving your long-term life goals. It comes with two components investment and life insurance. With this wealth creation component, you get the benefit of putting your premiums into governmental bonds, fixed deposits, and more, such that you allow your investments to grow.

These are moderate risk plans with a decent return on investment along with protection from life insurance. These plans also serve as tax saving investments. The premium invested in savings plan is eligible for Income Tax deductions up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961. The maturity benefit and death benefit are also eligible for tax benefits under Section 10(10D) of the Income Tax Act 1961. The above-mentioned tax deductions and benefits are subject to the provisions stated in the tax laws.

Market-Linked Insurance Plans

ULIP Plans provide the dual advantage of insurance and market returns from investment. Unlike traditional insurance plans, ULIPs also help in wealth creation. One’s premiums can be invested in equity, debt, or hybrid funds of one’s choosing. With the right investment horizon, the same volatility may lead to long term gains that may help you beat inflation, where the growing living costs eat into your profits.

ULIP funds can be changed to one’s liking or you can rely on your life insurance company’s automatic switching, if available as per product conditions. You have the option to switch from debt to equity or vice versa as and when you see fit with the manual switching. You can keep a watch on market moves between ULIP funds strategically. Similar to savings insurance plans, ULIPs are subject to tax deductions as per Section 80 C of the Income Tax Act, 1961. You can also avail of Section 10 (10D) tax exemption on your maturity amount subject to fulfilment of specified conditions in the tax laws.

Health Insurance

When it comes to the question of how to invest money in health insurance, it is important to become aware of the four types of health plans: mediclaim policies, top-up plans, critical illness cover, hospital cash benefit plans. There is no single best policy and the health insurance for a salaried individual will depend on his/her individual situation. Usually, insurance providers recommend opting for a combination of around two or more health insurance plans, as some plans offer benefits that others do not.

When it comes to your taxes, each of these plans is subjected to tax benefits as per Section 80D of the Income Tax Act 1961 subject to provisions specified therein.