Exhausted tax-saving limit under 80C? Here is how to save more tax

I am 33 years old and I work for a large multinational company. My salary is ₹1,28,000 a month, but a large part of the taxes go to pay taxes. I have invested ₹ 1,50,000 in Provident Fund, PPF and Life Insurance. How can I save more taxes?

The investment limit of ₹1.5 lakh under Section 80C is very low and runs out quickly. If you want to save more on taxes, you can contribute to the National Pension System (NPS). NPS is a low-cost scheme that helps you save for retirement and offers an additional discount of up to ₹ 50,000.

Investors can choose from seven pension fund managers and select their own mix of assets. As you are young you should put the maximum in equity funds and the rest in debt. If you can't decide on the asset mix, you can choose a life cycle option where your age will determine your equity and debt allocation, constantly changing it each year as you age.

While NPS is a great way to save for retirement and reduce taxes, consider a few features of the system. This system comes with an extra-long lock until you retire at 60. You can't withdraw funds before retirement, except in certain emergency situations. This makes the scheme very illiquid.

Even at the time of expiration, the investor can withdraw only up to 60% of the pool of securities. While this provision of 60% is tax deductible, the remaining 40% is mandatory for an annual salary to obtain a monthly pension. This monthly pension is taxable as income. The upside is that one's income declines after retirement, so the pension does not increase the tax liability much.

Another nice feature is that investors can change their asset mix based on their reading of the market. These keys do not give rise to any tax burden. They can also switch from one retirement fund manager to another without incurring taxes.

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