Getting your salary feels good. Seeing the TDS deduction feels bad.
Every month, your employer cuts tax from your salary. This is TDS on salary. Can you reduce this legally? Yes, through smart investments.
Understanding TDS on Salary
TDS means Tax Deducted at Source. Your company calculates yearly tax, divides by 12, and deducts monthly.
Example: Annual tax is 60,000 rupees. Employer deducts 5,000 monthly as TDS on salary.
Higher TDS means less money in hand. Lower TDS means more monthly income. You can legally reduce it by claiming deductions.
How Investments Reduce Tax
Indian tax law allows deductions for certain investments. You invest money in specific schemes. Your taxable income reduces.
Lower taxable income means lower tax and lower TDS monthly.
Example: Salary is 10 lakh. Invest 1.5 lakh in eligible schemes. Taxable income becomes 8.5 lakh. Tax calculated on 8.5 lakh instead of 10 lakh.
Section 80C – Main Tax Saver
Section 80C allows a maximum deduction of 1.5 lakh rupees yearly.
Many investments qualify – PPF, EPF, life insurance, ELSS mutual funds, NSC, tax-saver FDs.
Investing in these reduces taxable income by up to 1.5 lakh. Choose the best investment options in India that fit your needs.
Best Investment Options Under 80C
- PPF: Safe, government-backed, 7.1% interest, tax-free maturity, 15-year lock-in.
- EPF: Automatic for salaried, 8.15% interest, very safe.
- ELSS: Mutual funds, 3-year lock-in, 12-15% potential returns, shortest lock-in period.
- Life Insurance: Premium qualifies for deduction, provides family protection.
- NSC: Post office scheme, 5 years, 7.7% interest, government-backed.
- Tax Saver FDs: 5-year bank deposits, 6.5-7% interest, safe but taxable returns.
Additional Tax Deductions
Beyond 80C, other sections reduce TDS on salary further.
- Section 80CCD(1B): Extra 50,000 for NPS investment over 80C limit.
- Section 80D: Health insurance – 25,000 for family, an additional 25,000-50,000 for parents.
- Section 24: Home loan interest up to 2 lakh.
- Section 80E: Education loan interest, full amount deductible.
Choosing the Right Mix
Choose the best investment options in India based on age, goals, and risk appetite.
Young professionals can try ELSS and NPS for higher returns. Middle-aged need balance – mix PPF with ELSS. Near retirement, want safety – PPF, NSC, tax-saver FDs.
Consider liquidity needs. Some investments lock money for years.
Declaring to Employer
Investing alone isn’t enough. Inform your employer about planned investments.
Companies ask for a declaration for the financial year. Your employer adjusts TDS on salary immediately based on the declaration.
Without a declaration, higher TDS gets deducted. You claim a refund later, but get less money.
At year-end, submit actual investment proofs. If the actual is less than the declared, the employer deducts extra TDS in the last month.
Maximizing Deductions
- Health Insurance: Premium saves tax under 80D, plus protects financially. Family floater covers everyone. Senior citizen parents get additional deduction benefits.
- Home Loan: Double benefit – principal under 80C, interest under Section 24. Combined benefit up to 3.5 lakh yearly. Inform the employer to adjust TDS on the salary.
- NPS: Among the best investment options in India for retirement. 80C plus extra 50,000 under 80CCD(1B). Total 2 lakh possible deduction. Very low charges, market-linked returns.
Tax Savings Example
Annual salary 8 lakh. Without investments, tax around 62,500 rupees.
Invest 1.5 lakh in 80C. Invest 50,000 in NPS. Pay 25,000 health insurance.
Total deductions: 2.25 lakh. Taxable income becomes 5.75 lakh. New tax around 23,750 rupees.
Tax saved: 38,750 rupees. That’s 3,229 less TDS on salary monthly through best investment options in India.
Tax Regime: New regime has lower rates but fewer deductions. Old regime allows all deductions. If deductions exceed 2.5 lakh, old regime usually better.
Smart Planning
Don’t wait till March. Spread investments throughout the year. Monthly SIPs in ELSS work well. Automatic investment with rupee cost averaging benefits.
PPF allows deposits anytime. But investing early in the financial year maximises interest benefit. Plan at year. Execute gradually. Avoids last-minute rush and stress.
Common mistakes to avoid: Don’t invest only for tax savings without considering financial goals. Don’t forget proof submission – without proofs, the employer can’t give the final TDS adjustment. Don’t exceed 80C limit in one scheme – diversify across different best investment options in India. Don’t ignore additional deductions beyond 80C, like health insurance, NPS, and home loan.
Action Plan
List all possible deductions you can claim. Calculate total amount available.
Choose best investment options in India covering maximum deduction limit. Match investments with your financial goals and risk tolerance.
Inform employer early for lower TDS on salary from April itself. More money in hand throughout the year.
Track investments monthly. Ensure you actually make declared investments. Keep all receipts and certificates organized.
Submit proofs on time at financial year end. Get correct TDS certificate Form 16. File income tax return to claim any additional refund if applicable.
Long-Term Wealth Building
Smart tax planning does more than reduce TDS on salary. It builds wealth systematically.
The best investment options in India grow money while saving tax. PPF compounds tax-free. ELSS gives market returns. NPS builds retirement.
Start young. Invest regularly. Small tax savings today become substantial wealth tomorrow.
Discipline beats timing. Consistency beats amount.
Final Thoughts
Reducing TDS on salary is completely legal and smart. Government encourages savings through tax benefits.
The best investment options in India serve dual purpose. They build your wealth while reducing tax burden.
Don’t invest blindly for tax saving. Choose options matching your financial goals, risk appetite, and time horizon.
Start planning early. Declare investments to employer. Submit proofs on time. Enjoy more take-home salary every month.
Smart tax planning means more money for you and your family. Use it wisely to build long-term wealth.
