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Tax Expert - Answered on Jun 23, 2023

CA Tejas Chokshi has over 20 years of experience in financial planning, income tax planning, strategic and risk advisory, banking and financial products and accounting and auditing.
He is an information system auditor, a forensic auditor and concurrent bank auditor.
Chokshi, who has a master’s degree in management, audit and accounting from Gujarat University, has completed his CA from the Institute of Chartered Accountants of India.... more
RAJIV Question by RAJIV on Jun 05, 2023Hindi
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Hello sir I m a salaried person of amount Rs. 10 lacks/ anum, what is the correct way to use of my salary with minimise the tax liability also. I am investing only LIC PPF,MF, & STOCKS ONLY & interested in property & gold. Also suggest the percentage by allocation in DIFFERENT tools with expense also.

Ans: presuming you have exhausted the limit of Rs. 1.50 Lacs with your existing PPF, LIC etc, you may still have room for investment u/s 80CC(1) and 80CC(2), which are central govt schemes for investment in pension schemes like Atal Pension yogana which gives additional deduction of Rs. 50 K. You can claim your bank interest in Sec. 80TTA. Claim donations, if any in 80G. in case if you have any housing loan, interest upto Rs. 2.00 Lacs is deducted from salary and net salary is offered to tax. The principle portion can be deducted from Rs. 1.50Lac slab also
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Financial Planner - Answered on Sep 23, 2024

Asked by Anonymous - Sep 21, 2024Hindi
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I’m Kunal from Mumbai. I’m 40, a salaried professional with two children. How can I optimize my tax savings through mutual funds, PPF, and NPS for the long term?
Ans: To help you optimize his long-term tax savings, a well-rounded approach leveraging mutual funds (ELSS), PPF, and NPS will provide both tax efficiency and growth potential, balancing risk and security. Here’s a comprehensive strategy:

Key Investment Options:

1. Public Provident Fund (PPF):

• Tax Deduction: Up to Rs 1.5 lakh under Section 80C.
• Lock-in: 15 years, providing low-risk, government-backed returns (around 7.1%).
• Strategy: Maximize PPF contributions to Rs 1.5 lakh annually for stable, long-term, and tax-free growth.

2. National Pension System (NPS):

• Tax Deduction: Rs 1.5 lakh under Section 80C and an additional Rs 50,000 under Section 80CCD(1B).
• Equity Exposure: NPS offers flexibility in equity allocation, providing the potential for higher long-term returns.
• Strategy: Contribute Rs 50,000 for the additional tax benefit and build a retirement corpus, balancing equity and debt for moderate growth.

3. Equity-Linked Savings Scheme (ELSS):

• Tax Deduction: Up to Rs 1.5 lakh under Section 80C.
• Lock-in Period: 3 years (shortest under 80C).
• Growth Potential: Higher returns due to equity exposure.
• Strategy: Start a Systematic Investment Plan (SIP) in ELSS funds to benefit from tax savings and market-linked growth over the long term.

4. Comprehensive Plan for you:

a. Maximizing Tax Benefits:

• Contribute Rs 1.5 lakh to PPF for safe, consistent returns.
• Invest Rs 50,000 in NPS to take advantage of the additional tax deduction under Section 80CCD(1B) and build a retirement corpus.
• Allocate any remaining eligible tax-saving contributions to ELSS to optimize growth under Section 80C.

b. Diversified Investment Strategy:

• PPF: A risk-free option with guaranteed returns, perfect for long-term, low-risk growth.
• NPS: A moderate-risk option with the potential for higher returns through equity exposure, focusing on retirement planning.
• ELSS: A higher-risk, higher-reward option for long-term wealth creation and tax savings.

c. Additional Tax-Saving Measures:

• Health Insurance Premiums: Claim up to Rs 25,000 (or Rs 50,000 if covering senior citizen parents) under Section 80D.
• Home Loan Interest: Deduct up to Rs 2 lakh under Section 24(b) for home loan interest payments.

d. Tailored Recommendations:

• PPF: Max out the Rs 1.5 lakh limit to secure risk-free growth.
• NPS: Contribute Rs 50,000 annually to build a retirement corpus while enjoying additional tax benefits.
• ELSS: Invest the remainder of your Section 80C limit in ELSS to benefit from equity market growth.
• Regular Monitoring: Review and rebalance your portfolio as your financial goals evolve to ensure optimal growth and tax savings.

By following this balanced and diversified strategy, Kunal can optimize his tax savings while securing a solid financial future for his long-term goals.

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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