As a salaried employee, maximizing tax savings is crucial to maintaining financial stability and ensuring a comfortable future. By taking advantage of various tax-saving options, you can significantly reduce your tax liability and increase your disposable income.
Also check: Employee benefits in India
In this article, we'll explore 10 effective tax-saving tips for salaried employees in 2023.
1. Invest in a Public Provident Fund (PPF):
PPF offers a tax-free investment option with an attractive interest rate. You can contribute up to Rs. 1.5 lakh annually and claim a deduction under Section 80C of the Income Tax Act.
2. Utilize the Employee Provident Fund (EPF):
Contributing to the EPF through your salary allows you to avail tax benefits under Section 80C. The employer's contribution and interest earned are also tax-free.
3. Consider National Pension Scheme (NPS):
Investing in the NPS helps build a retirement corpus while providing tax benefits. Contributions up to Rs. 1.5 lakh under Section 80C and an additional deduction of Rs. 50,000 under Section 80CCD(1B) are eligible.
4. Maximize House Rent Allowance (HRA):
If you live in a rented house, you can claim HRA as an exemption from your taxable income. The amount eligible for exemption depends on your salary, rent paid, and the city of residence.
Check out: HRA exemption calculator
5. Purchase Health Insurance:
Investing in a health insurance policy for yourself, your spouse, and your dependent children can help save taxes under Section 80D. The premium paid is eligible for deduction up to Rs. 50,000.
In case, you are covered under a group health insurance policy and do not have an individual health insurance policy, you can opt for super top-up health insurance. In this way, you can upgrade your group health insurance cover up to 20 Lakhs and get tax benefits under Section 80D for the premium you pay.
6. Avail Home Loan Tax Benefits:
If you have a home loan, you can claim deductions on both the principal (under Section 80C) and the interest (under Section 24) components, significantly reducing your taxable income.
7. Opt for Leave Travel Allowance (LTA):
LTA is a special allowance provided by employers to cover travel expenses. You can claim tax exemptions on the travel expenses incurred for yourself and your family members as per the terms and conditions of your organisation.
With Pazcare, you can claim your Leave Travel Allowance hassle-free using the LTA wallet.
Explore the Leave Travel Allowance Wallet now.
8. Opt for a Tax-Saving Fixed Deposit (FD):
Investing in tax-saving FDs with a lock-in period of 5 years can fetch you tax benefits under Section 80C. Interest earned is taxable, but the principal amount qualifies for a deduction.
9. Opt for tax-free meal cards:
As per the Income Tax Act Section 17(2)(viii), meals provided to employees can be tax-free and this is called tax-free meal cards.
A standard allowance of Rs.50/meal is allowed by the government. If we consider the standard working days to be 22 and the standard working hours to be 8 - 10 hours per day, the employer can provide 2 meals a day. This means Rs. 100 per day So the amount allowed is Rs.2200/month and Rs.26,400 per annum. This is applicable as per the old tax regime.
10. Opt for the New Tax Regime:
If you have exhausted most of the deductions available under the old tax regime, you can switch to the new tax regime with lower tax rates. However, carefully evaluate the impact on your overall tax liability before making the switch.
By utilizing these 10 tax-saving options, salaried employees can optimize their tax planning and minimize their tax burden in 2023. Remember to consult a tax expert or financial advisor to assess your specific situation and make informed decisions. Start early, plan wisely, and secure a better financial future for yourself and your loved ones.
Tax-saving employee benefits solutions from Pazcare
The Indian Government has allowed a few components like LTA, food allowance, fuel allowance, books and periodicals allowance, etc as part of your CTC. As employees, you can claim tax-free benefits on the same.
Pazcare offers these tax-free employee benefits solutions in a unique way. As employers, you can opt for this “Pazcard” benefit to maximize your employee’s take-home salary. Pazcare will create a Pazcard dashboard and activate wallets for individual employees requested. The employees can activate this wallet by completing the KYC process and start saving on taxes.