The end of the financial year in India is a nightmare time for taxpayers. At this time, many people are involved in prudent investment decisions to save on tax. Amid all these activities, the race to exploit various tax-saving options can be a complicated process. This necessitates having a well-planned financial plan. If you are confused about tax optimization, one friend you would like is a financial planner.
Here is an elaborate guide on financial planning that speaks to investment planning strategies, particularly those maneuvering through the maze with a one lakh salary.
Understanding Financial Planning
Financial planning is about creating and executing a plan to manage your money in such a way that life goals and objectives are attained while avoiding risks that come with it. It entails saving and investing your hard-earned money so as to accomplish your desires but also gives you some fiscal benefits.
Through wise investing with a wealth management strategy, individuals can realize their financial dreams while also significantly reducing their taxable income leading to substantial tax savings. Hence, consulting a reliable wealth advisor could be useful in getting tax advantages as well as improving your overall economic well-being.
Crucial Tax Saving Investments for Indian Taxpayers
Although every investor’s journey is different, there are certain common ways through which they can save on taxes. Here are five main options for saving on tax.
Public Provident Fund (PPF)
PPF scheme happens to be one of the favorite long-term investment tools meant for tax saving. The interest earned and the returns are exempt from tax, and the amount invested is deductible under Section 80C of the Income Tax Act.
Equity Linked Saving Scheme (ELSS)
ELSS mutual funds are another excellent way to save tax under Section 80C. In addition to tax benefits, these funds boast higher returns than other investment options due to their equity-linked nature.
National Pension Scheme (NPS)
The NPS is a pension cum investment scheme that provides income post-retirement, which can be particularly beneficial for those with 1 lakh salary or more. Contributions made to NPS are eligible for tax deduction under Section 80C. One can also claim an additional tax benefit of Rs.50,000 outlined in Section 80CCD(1B). This makes the total deductible amount as Rs.2 Lakhs.
Five-year Fixed Deposit (FD)
Also, you may consider Five-Year FDs, which is a safe investment option. They offer risk-free returns and tax benefits as stipulated in the Income Tax Act.
Financial Planning For 1 Lakh Salary
When planning finances around one lakh salary, the objective is not limited to saving taxes but trying to make your money work towards what you desire. Here is an illustrative allocation:
- ELSS: ₹40,000 – For growth potential.
- PPF: ₹30,000 – For risk-free saving.
- NPS: ₹50,000 – For retirement corpus (excluding an employer’s contribution, where applicable).
- ULIP: Although pricier than other schemes, those wishing to have insurance coverage need to put aside some cash for it from their savings account.
This assorted investment blend assures a balanced approach to tax-saving investment, financial planning, and wealth appreciation.
Conclusion
Strategic financial planning, particularly when guided by a seasoned financial planner, can convert tax savings from a grudging obligation to a conduit for financial liberation. Investment planning is a must whether you earn one hundred thousand or any other amount, to keep your financial lyre in tune. A prudent investment today will ensure a financially stable future.
