Salaried employees earning up Rs 12.75 lakh per annum are not required to pay income tax under the new tax regime after the hike in rebate in Budget 2025-26. That means more cash in hand and higher disposable income for employees.
This gives salaried employees more freedom to spend, but it also comes with more responsibility to save.
If you earn Rs 1 lakh a month, you're already in a strong financial position than most. If used wisely, this income could be used to secure your financial future, through emergency funds, long-term retirement plans and even fund short-term goals like international holidays.
After covering monthly expenses, if you are able to save at least 25-30% of your income, here is what you can do:
1. Create an emergency fund: If you don’t already have an emergency fund with at least three months of expenses, build it. Set a portion of your savings for unexpected emergencies.
2. Assuming your emergency fund has been created, you may now allocate your savings toward short and long-term goals.
Assuming you save Rs 30,000 per month, here’s how to use it:
Retirement Corpus
Create a systematic investment plan of Rs 15,000. This may be a large-cap mutual fund or a mixed asset allocation fund. Try to use the ‘step-up SIP’ method to increase your contribution as your salary grows over the years.
Time period: 20 years
SIP: Rs 15,000
Step-up: 10%
Expected returns: 12% (large cap)
Total investment: Rs 1,03,09,499
Estimated returns: Rs 1,95,23,573
Maturity corpus: Rs 2,98,33,073
This will help build a nearly Rs 3-crore corpus for your retirement needs.
You may also consider investing money in a public provident fund (PPF), a government-backed backed guaranteed scheme that offers tax-free returns. The current interest rate on PPF is pegged at 7.1%, subject to periodic review. PPF comes with a 15-year lock-in period.
Time: 15 years
Monthly amount: Rs 5,000
Interest: 7.1%
Invested for 15 years: Rs 9 lakh
Returns: Rs 6,77,840
Maturity after 15 years: Rs 15.77 lakh
Maturity if continued for 20 years (with contributions): Rs 25.82 lakh
Short, Medium-Term Goals
The remaining Rs 10,000 could be invested in fixed deposits, arbitrage or debt mutual funds, or gold. Returns on FDs are not that attractive, but they offer security even for smaller investment durations such as six months to one year.
Both gold and debt-oriented mutual funds have traditionally given around 10% returns.
Time period: 5 years
Returns: 10%
Monthly investment: Rs 10,000
Invested amount: Rs 6 lakh
Estimated return: Rs 1,80,823
Maturity: Rs 7.8 lakh
Stock market investments are inherently volatile. Before making significant financial commitments, it's wise to consult a financial advisor to avoid potential financial stress.
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