Tax Saving Tools for Corporate Employees

We are in the middle of the year 2017 and at a beginning of the fiscal year 2017-18. This would be the apt period wherein the taxpayers can manage the tax position for the whole year. This would save them last minute rush and would also avoid the unnecessary investments for tax saving made in last minute hustle.

Here is the listing of some of the best Tax Saving Tools for employee strength to lower their burden…

ELSS (Equity Linked Savings Scheme)


ELSS is the most dynamic yet quite stable (as compared to other equity instruments), tax saving instruments. ELSS are the mutual funds which invest in equity and has more than one category like the Large cap (which invests in blue chip companies which have larger market capitalization), small cap (which are much speculative and hold in comparatively smaller market capitalization), etc.

Benefits of ELSS

  • Exempted under section 80C

  • Better performance in terms of returns on the investment (almost around 12-13% depending upon the market circumstances)

  • Gives out a well-balanced wealth building plans (plow back the dividend returns for wealth build up)

  • Has the lowest lock-in period as compared to other tax saving instruments.

  • Even if the investor wishes to generate regular income, he can opt for dividend plans (but it is to be noted that NAV of the units will go down whenever dividend is distributed)

  • Dividends are tax-free since dividends pertain to equity and is prescribed under income tax

  • Similarly, capital gains are tax-free only if these are sold out after the lock-in period (if these are sold or redeemed within the lock-in period then deduction under section 80C allowed in current as well as earlier year/s will be revoked back)

  • SIP is the most effective and beneficial option to invest in small quantity in ELSS, which will be much bigger at the end of the lock-in period

PPF (Public Provident Fund)


PPF investment is exempted under section 80C and is very much popular and mostly opted by the salaried individuals. This is because it not only caters to the tax saving need of the taxpayer but it also takes care of their retirement corpus. Carrying the longest lock in period, PPF provides for much higher wealth component, making it most sought after investment options for retirement planning. Moreover, it has EEE structure as far as taxation is considered, which means contribution is exempted under section 80C, returns are exempt and principal redemption is anyway not taxable.

PPF also comes with partial withdrawal facility which can be opted only from 6th year onwards, but this is warranted only once during the lifetime.

NPS (National Pension Scheme)


NPS investment is exempted under section 80CCD, which is over and above the threshold of section 80C limit, up to Rs.50,000. So, this is an ideal option for those taxpayers in higher tax bracket who have exhausted their 80C limit and still wish to save tax.

However, NPS is not all about tax saving, it is mainly about retirement planning. There is one more twist to NPS as compared to conventional retirement planning instruments. NPS is like the mutual fund and is managed by three odd fund managers like ICICI, SBI etc. These fund managers invest the funds of the investors based on the option selected by the investors as to preference of type of instruments. There are two options – one is auto where the fund investment is adjusted between debt and equity based on the age of the investors and another is the manual option wherein the investor will determine the percentage investment in equity and debt, based on his risk appetite.

The results of this dynamic portfolio mix can be very well observed in its return pattern which is definitely better than conventional retirement plans. However, there is still concern about the taxability of the amount received on maturity and mandatory annuity once the maturity period is over.

Housing Loan


Even though this is not exactly investment instrument, repayment of housing loan can bring in much more joy than just owning the house property.

  • Interest repayment can be claimed as negative income under section 24B which is allowed to be set off against rental income if any from the house and also salary income. So if you own only one property, your interest repayment on housing loan will save tax on salary income to such extent.

  • Principal repayment is exempted under section 80C and hence you can claim the deduction for the same if the same is not exhausted yet. This is very beneficial to those who have liquidity crunch.

Medical reimbursement health-care-costs

Medical allowance or reimbursement is exempt to the extent of Rs.15,000, only subject to submission of medical bills, doctor’s consultancy receipts, etc. These bills or receipts should be submitted to the employer and then the employer will exempt the allowance. If the employee fails to submit the bills for approval of employer, the he can not avail the exemption of the allowance in the return of income by himself. 

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