How To Build Wealth And Also Reduce Your Tax Outgo!

TAX PLANNING - Be smart by integrating tax savings with financial goals, build wealth and also reduce your tax outgo

- Narayan Krishnamurthy

For the salaried Indian, income tax saving is a stress-inducing facet. The entire rigmarole of worrying over how much to save to reduce income tax, and where to save and invest to save tax, involves some of the common pain points. With several tax-saving options, the choice could be daunting as much for a new taxpayer as for a seasoned one. Moreover, tax laws often change and one could move from a lower to a higher tax bracket, resulting in a change in the applicable income tax rate.

In fact, today, we have two income tax structures-one wherein you don't need to worry over tax savings, as in this option you pay an effective lower income tax across six tax slabs without claiming any income tax savings; and the other is the older tax regime, under which you can claim tax savings on a set of defined savings and investment instruments. The latter tax-saving option is popular for the numerous tax-saving avenues it offers and because it has been in existence for a much longer time. For many Indians, tax saving is the only source of a meaningful savings and investment plan.

There is a lot to choose from towards tax savings under Section 80C with its overall Rs 1.5 lakh limit. So, irrespective of the tax slab that one falls under, the maximum tax savings one could claim as deduction is Rs 1.5 lakh. The financial instruments vary from those with savings orientation to those in which the performance of the instrument is marketlinked. Then, there are select expenses that also could be claimed towards tax savings (see Tax Saving Options under Section 80C). With so much choice, it could be tough to select instruments that could work efficiently to meet your financial goals.

TAX SAVINGS WITH NPS