How to save tax if you’re a salaried employee

Avoid making costly investment mistakes to save tax – check out the best tax saving options this year.

As the financial year draws to a close, you are about to take stock of your tax liability for the year. You still have the time to make up for any shortfall by making an investment in a suitable tax saving option.

Consider the best ways to save tax in the year 2019:

* Buy life insurance.

The easiest and most sensible way to safeguard yourself and your loved ones from financial peril, is to invest in life insurance. We suggest buying a term insurance plan from a leading insurance provider. The term insurance costs you very little by way of premiums – about Rs 17 per day on some of the best plans – while giving your family members a sum assured of Rs 1 crore and above. You can save tax for term insurance premiums under Sec 80C and Sec 80CCC of the Income Tax Act, 1961.

* Buy health insurance.

A health insurance plan is a necessity at a time when medical treatment costs are prohibitively high in India. A single hospital visit may wipe out months of savings. A health insurance plan protects your finances by paying for hospital stay, treatment, surgery and daily costs. Health insurance premiums are eligible for tax benefit up to Rs 55,000 per year under Sec 80D.

* Buy a retirement plan.

If you think it’s too soon to start planning for your retirement, then think again. The years will pass by in a flash, and you will be left with hardly any time to plan your post-retirement finances. Start today by investing in a retirement plan. The pension policy or retirement plan can be a traditional plan, or a deferred/immediate annuity type, or even a unit-linked one. Pension plans get tax benefits under Sec 80CCC.

* Invest in the markets.

Investing in the markets helps you grow the size of your invested corpus, as well as create future wealth. If you want good growth on your investment, you should invest in the best tax saving mutual funds, the Equity Linked Savings Schemes (ELSS). The ELSS offers tax saving up to Rs 1.5 lakh per year under Sec 80C, along with a lock-in period of just 3 years. The fund is highly liquid, but you can choose to stay invested for a longer time after the lock-in period has elapsed. Risk-averse investors can choose the dividend option if you are risk averse.

* Open a tax saving FD.

Fixed deposits are most Indians’ first investment options. The tax saver FD has gained popularity in recent times, and it is offered by all major Indian banks and some leading financial institutions. However, the tax saver FD has a lock-in period of 5 years, so you cannot liquidate it before this period is up.

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