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Re-plan Your Investment Portfolio On Getting A Salary Hike

Getting a salary hike is a moment of joy after all the hard work you have put in your job. With the extra cash flow that you have received, you can opt for various investment opportunities to earn more returns than what your current investments yield. We have collated a list of investment options that you can choose to re-plan your portfolio and explore more options to invest in.

 

Income Brackets and Investment Selections

 

With a salary hike, wealth management becomes all the more important, since the raise might change your income tax slab. If you fall in the intermediate and higher income bracket, some of the best investment options you can consider for tax benefits include PPF, tax-free bonds, tax-saving fixed deposits and equity options like Equity Linked Savings Scheme (ELSS).

Investment opportunities when you get a salary increment

A salary hike is also the time to consider applying for a home loan. Most banks provide home loans with floating interest rates considering the long tenure of the home loan and the uncertainty of market rates during this time. The interest rates would vary between 8-18% depending on the bank. Tax deduction of up to Rs. 1.5 lakhs can be claimed on home loan interest under Section 80C of Income Tax Act. First time home owners can avail up to Rs. 50,000 additional tax deduction for home loan interests under Section 80EE, subject to certain conditions.

Tax Saving Schemes

If you haven’t already started a retirement investment, you can invest up to Rs. 50,000 in New Pension System and get tax deduction as per Section 80 CCD (1B). This is in addition to the tax deduction you can avail under Section 80C of the Income Tax Act. However, the maximum tax benefit that can be availed under Sections 80C, 80 CCD (1) and 80 CCD(1B) is Rs. 2 lakhs.

Mutual Fund Investments

While you might have already invested in mutual fund investment schemes, ELSS can also provide a tax deduction under Section 80C. Nevertheless, there is a lock-in period of 3 years for an ELSS investment. Other mutual fund investment opportunities include low-risk funds, growth funds, debt mutual funds that invest in corporate bonds, government securities, and equity funds that invest in equity shares.

Ensure that you don’t spend off all the extra cash flow received with the salary increment. Instead, use the above-mentioned tips to plan out your extra earnings and safeguard your future.

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