For individuals who have just started their career there can be a case that they might not be falling in the tax slab as per the government and for others who still fall in the tax net, here is suggested some important piece of information.
In your initial years of career, some of the parameters should be of far more importance such as the flexibility in respect of withdrawal from the investment, liquidity which lacks to an extent when it comes to tax saving investment options as they in most of the cases do generally come with lock-in as in the case of ELSS, PPF, tax saving bank deposits etc.
Nonetheless, if your pocket allows and you can remain invested without faltering on commitments towards the investment, you through prudent planning need to head start in the right direction with investment in some of the high-risk carrying options that also offer high returns and beat inflation while providing tax benefit such as ULIP investment and ELSS (allow tax deductions under Section 80 C upto Rs. 1.5 lakh in a financial year).
The idea is really fruitful when you can think of investing and locking in the money for the long term and not draw out funds when needed from such investments, as then there can be cases of discontinued subscription to mutual funds, dormant PPF account or missed premium as in the case of ULIPs. So, correct evaluation of your current and future fund flow as well as expenses plus some of the unexpected expenses certainly need to be accounted for before making any financial commitment for saving and tax-saving.
Wise financial saving tool for people who have just started with their careers:
1. Term insurance: Financial planning can be initiated with investment in an insurance plan that financially protects your near and dear ones in the event of your unfortunate death plus the premium paid towards it qualifies for deduction under section 80C.
2. PPF: PPF investment that can also be started with a small investment of just Rs. 500 in a year is another tax saving option that offers capital protection as well as high return of the order of 8%.
3. ELSS: If you have a penchant for risk and as your age allows need to certainly bet on this product as while providing deduction, it also diversifies your portfolio to include equity portion and thus over a period of time, you can reasonably higher return able to beat inflation.
But for others who have limited earnings, you should look to prioritize as term cover is needed more than ULIP or a health cover is more important as it shall be able to you at a cheaper rate at a young age with deductions under Section 80D.
Also, in case you live in a rented accommodation and HRA or house rent allowance does not forms the part of your salary, then you should claim deduction under section 80GG.
And as you reach your 30s with a higher salary, you can aim for other financial goals such as planning of your home with a loan and planning deduction on the principal payment as part of section 80C and interest pay out i.e. covered under section 24B. Also, you may be planning for your retirement and other goals such as to fund your child's education or marriage, herein you can consider investment into NPS which provide benefits under Section 80CCD.