Tax Saving Options for Salaried Employees

There are many tax planning options for salaried employees, like EPF, PPF, ELSS, as detailed above. As a salaried individual, you can invest in them based on your risk appetite, budget, and needs.

The taxes are levied on various tax saving options for salaried people, based on the rules related to capital gains, dividends, and taxes on interest. You are advised to know about these things in detail before making investments.

There is no specific limit to the tax planning options for salaried employees that can be chosen. However, limits do exist on the maximum deductions one can avail under a specific option.

The following tax saving options for salaried employees fall under the purview of Section 80C:

• PPF
• EPF
• Life insurance
• Tax-saving FDs, and many others

The best way to reduce tax liability is by investing in various tax saving options for salaried individuals.

Form 16 is for salary income exclusively, whereas Form 16A is for TDS on Income Other Than Salary. When a bank deducts TDS on your interest income from fixed deposits, for TDS deducted on insurance commission, or for TDS deducted on your rent receipts, for example, a Form 16A will be sent to you.

Very few new tax regime deductions are available to salaried, so the old tax regime is preferred. Here is the tax slab according to which income tax deductions for salaried employees apply as per the old tax regime FY 2023-24 (AY 2024-25):

The following situations qualify for salary arrears relief under section 89(1):

• Salary received in advance or in arrears
• Compensation if your job is terminated
• Pension Commutation
• Gratuity

When planning income tax deductions for salaried employees, these are some of the terms you must understand. FY stands for fiscal year, and it is the year in which you earn money. AY is the year after the financial year in which you must review and pay taxes on the previous year's earnings.

For example, if your fiscal year runs from April 1, 2019 to March 31, 2020, it is referred to as FY 2019-20. The assessment year for money earned during this time would commence after the financial year ended, which would be from April 1, 2020, to March 31, 2021. As a result, the assessment year will be 2020-21.

You can increase the tax benefits for salaried employees by purchasing insurance for your family members, investing money in your parents’ name, etc. Certain investments made in the names of your children, such as PPFs, ULIPs, mutual funds, and insurance policies, will be eligible for income tax deductions for salaried employees.

The income tax benefits for senior citizens include higher exemption limits, medical insurance tax benefits, relief from TDS under Section 194A and more.

If you pay rent for your residential accommodation, you can claim a tax exemption on HRA. By producing documentation of rent receipts to your employer, you can claim HRA exemption. You can also claim the HRA exemption on your own when filing your income tax return.

Depending on your investment portfolio, you can optimize your income tax deductions for salaried employees if you are careful. There are income tax calculators available to help estimate the tax saving for salaried individuals.