How investment can help you save tax

Santhosh Pannirselvam, a 30-year-old marketing manager based in Chennai, is paying a very high tax on a modest income. This is largely because he has not utilised his tax saving investment limit under Section 80C. He has also not taken the tax benefits available to him under Sec 80D for health insurance of his family and parents.

Santhosh can start by rejigging his salary structure. Instead of a high special allowance, his employer can invest up to 10 per cent of his basic in the NPS on his behalf under Sec 80CCD2. The tax-free conveyance allowance should also be hiked to the maximum limit of Rs 1,600 a month.

He should then focus on tax saving investments. He is young but has no equity exposure. For him, ELSS funds is the best option. He can also go for a low-cost online Ulip. But don’t invest lump sum at one go. Take the SIP route of monthly investments.

Santhosh should also open a PPF account and invest small amounts in it. Also, he should avail of the tax benefits for health insurance under Sec 80D. These steps can reduce his tax to Rs 290, a saving of Rs 20,680.