I am new employee – Where to invest for saving Income tax ?

POSTED BY sandeep273 ON January 5, 2014 10:26 am COMMENTS (11)


I need some guidance on the following.

I am 21 yrs and a new employee. The Finance and account person informs me that I need to invest 50k to get Incme tax rebate or else I need to pay some 10k as Income tax. I can spare 50 k now but I am not sure where to invest.

I dont have any insurance. I am thinking of taking term plan. but the max period is only 30 yrs. So if i take now it will cover me only upto when I am 51 yrs.

PPF is another option. Should I put the entire 50k in PPF?

Any advice will be apprecieted.





11 replies on this article “I am new employee – Where to invest for saving Income tax ?”

  1. ashalanshu says:

    Dear Sandeep, if you do have PF contribution running, please invest the remaining amount in it for quick saving and approval. As it ‘ll be lock down till your retirement, it ‘ll be a good thing over the long period due to compounding.



  2. ashalanshu says:

    Dear Sandeep, if there is no dependent on your life as on date, you should not purchase a term plan at all.



  3. akv says:

    As you have taken education loan , I would suggest taking term insurance should be your first priority. Also your savings account needs to have 3-4 months corpus. For tax savings you can invest in PPF (min investment : 500, Lock in : 15 years). If you are left with any surplus money you can invest in pension fund (NPS min investment : 6000 lock in : withdrawal permitted only after you turn 60).

  4. ashalanshu says:

    Dear Sandeep, if you die today, how many persons ‘ll be impacted from stop in your income?



    1. sandeep273 says:

      Dear Ashal

      Not many. May be my parents who spent some 10 lakhs for my educaiton to far.


  5. vijay says:

    Why would you keep paying taxes? That’d baffle me. Instead of losing your money to the govt., one would rather put it to better use. Assuming you already have your health insurance taken care of, for now my vote will be for either PPF or tax-saving FDs. Better to keep that money locked away for a specific duration (and recover it eventually) than lose it forever!

    After a year or so of studying the market, you can comfortably dabble around in it…

  6. sandeep273 says:

    Thanks to mmgeorge, basavareddy and Rahul

    Rahul, Even I thought to pay off tax and keep the rest of the amount with me. But people around are thinking I an crazy to pay off tax when money is available to invest.
    Anyway, is there any other option for me to invest in some tax-saving investment which I can redeem after say, 3 years?


    1. rahul123 says:


      Good to know that you are thinking in right direction.

      It doesn’t matter how people think about you. I have seen people booking losses much higher than the amount they saved on tax.

      As you are young, you will require money at regular interval for your personal goals.

      1. You should buy term plan (As of now 50 lakh cover is enough)
      2. Put the money in FD for 3 years
      3. Open a PPF account – you only require Rs 500 to open this. When your income increase over some time, contribute more to it (the money will be locked for 15 years, but the return are unmatched over “long term”).The advantage of starting PPF is that after 15 years (you will be around 36) and you might require money to buy house or other goal. You can use this money at that time

      My advise to you is that,keep learning about market. Have some corpus created over next 5-7 years and after financial stability you can think of investing in equity/MF. Don’t invest anywhere to save tax, otherwise when you require money you have to beg to your friend/relatives or need to take loan at higher rate.


  7. rahul123 says:

    Till you get some knowledge in this field, PPF is good option. But the money invested in PPF willl be locked for 15 years. But i personaly feel that this is the best option.

    In case if you require money after some years (say for marriage, buying a house etc), instead of locking it in some unknown obscure unpredictable financial product (like LIC policy/stock market/MF) , i will advise you to pay tax and have cash with you.


  8. Basavareddy says:

    Hi Sandip.

    U can opt Term Insurance upto 45 years period ie it covers u upto 65 years of age.
    only 1 lakh is exemted under IT out of ur salary. u can show ur EPF as savings. If ur EPF is 50,000 PA then u need to save another 50 K. Life Insurance , Term Insurance, medical insurance, NSc will come under 80 cc.



  9. mmgeorge says:

    Welcome new employee, a long way to go for in your life!

    21 years of age is a good time to start for investments, as you already started monthly earnings.

    Your finance dept may be asking you for investment proofs as early as January for the financial year ending March. If you have plan for 50k investment (or whatever be the amount you can save), think about a mix of insurance policy, term plan and a health (individual or family floater) insurance plan. If a salaried employee, you will have already enrolled to a PF account (as long as you are employed), PPF should not be a priority now, though it should not be ruled out in the long term perspective. Other investment options such as ULIPs, mutual funds, etc also available with investment returns as well as risks associated within it.

    In each of the above categories (insurance), it is solely your choice as per needs and you will find ‘n’ number of options and solutions available in the market.


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