🧠 How I Learned to Stop Worrying and Start Saving Taxes in India since 2014 (2025 Edition)
“Okay, I’m earning well now… but where is all the money going?”
That was me, fresh into a higher tax bracket, staring at my payslip wondering why my savings weren’t growing in sync with my salary.
🧾 Quick Note on Who This Applies To
This article is written with a wide umbrella in mind — covering citizens and residents of India
That means if you fall under categories like OCI, NRI, ROR, or RNOR and are either salaried or freelancing, this post is likely still relevant to you. Not very appropriate for folks running their own mid/large businesses.
We’ll dig into how each of those statuses affects taxation and investments in a future post.
✅ For now, just know this is designed for people who are still tied to India through income, residency, or reporting — even if life has taken you across borders.
📌 My next few articles will explore the investment journey once you’re fully outside India — the land of DTAA, FATCA, and cross-border tax juggling. Stay tuned!
✍️ My First Brush With Taxes: A Personal Tale
I got my first major earnings during university — from coding contests, internships, and research gigs.
The curious PM in me couldn’t help but ask: “Do I owe the government anything?”
Thankfully, I was below the tax bracket back then. But it planted a seed.
My first real tax moment came during my first job in Mumbai. Like many new grads, I had no clue how to declare investments or save taxes.
And then I made the classic rookie mistake:
I walked into my bank and let them “help me” with a traditional investment + insurance plan — the kind with terrible returns, long lock-ins, and just enough 80C savings to seem useful.
I ended up paying premiums for nearly 8 years — all for a product I didn’t need.
I’m still technically “trapped” in it. And it’s been 11 years now.
I’ll write a separate post on why these bundled insurance-investment plans are often a poor choice.
But if you’re just starting your career — please avoid this trap.
🎯 My Mission: Grow Wealth. Save Tax. Stay Flexible.
My mission in life is to grow comfortably — not just in terms of wealth but also in freedom.
That means:
- Building enough assets so I don’t fear taxes or uncertainty
- Learning how to invest wisely
- And most importantly, staying flexible in how I live my life
> Imagine booking a last-minute flight to Tokyo just to attend a concert,
> Or moving to Lisbon for 3 months without worrying about your bank balance.
That’s the kind of financial freedom I want — and I want it to be sustainable, not a one-time stunt.
Yes, this post is all about wealth creation and ₹₹, but let me be real:
I’ve left out the other complexities of life — friendships, relationships, health, the “vibe” of a place, even loneliness.
Those things matter deeply.
But here, we’re zooming in on just one piece of the adulting puzzle: money.
Because once this piece is solid, everything else becomes just a little easier.
I decided to compare four powerful investment instruments available to salaried Indians:
- NPS (National Pension System)
- EPF (Employees’ Provident Fund)
- ELSS (Equity Linked Savings Scheme)
- Equity Mutual Funds
I wanted to understand which one gives the best balance of return, tax saving, and flexibility.
So I ran a 10-year simulation using:
- Salary levels: ₹20L, ₹50L, ₹1Cr
- Contribution rates: 5%, 10%, 15%, 20% of salary
- Annual compounding
- All relevant tax benefits (80C, 80CCD(1B), LTCG, and HRA)
🌍 Who This Is Really For
I’m writing this for folks who consider themselves global citizens — the ones who are mobile, adaptable, and ready to move between countries if the opportunity calls.
This isn’t a 101 guide for fresh grads or interns.
I’m speaking to you if you’re in the 25–40 age range — a time when:
- You’ve started earning well
- You’re building real financial independence
- You have the energy to small talk in a new city and navigate a new tax system if needed
That’s why I’ve used higher salary bands in this guide: ₹20L, ₹50L, and ₹1Cr.
Because this is when it matters most to get your financial house in order — before responsibilities scale, families grow, or flexibility fades.
🔬 Methodology: How These Numbers Were Simulated
This isn’t just opinion — it’s modeled math.
To simulate the wealth growth, I used the classic future value of annuity formula :
FV = P × [(1 + r)^n — 1] / r
Where:
- `P` = Annual investment amount (e.g. 10% of salary)
- `r` = Annual return rate (EPF: 8.25%, NPS: 9%, ELSS/MF: 12% but taxed)
- `n` = Number of years (10 years)
- `FV` = Total corpus at the end of the investment period
📌 Tax Adjustments
- ELSS & Mutual Funds: Gains above ₹1L are taxed at 10% (Long Term Capital Gains). So I reduced corpus by ~5% for realism.
- NPS: Returns are partly taxable upon annuity withdrawal — included only tax-free corpus here.
- EPF: Entire corpus is tax-free.
🧾 HRA & Tax Savings
- Basic = 40% of salary
- Rent assumed = 35% of salary
- HRA exemption based on lowest of:
— HRA received
— Rent paid — 10% of basic
— 50% of basic (metro assumption)
I also maxed out deductions under:
- 80C (₹1.5L — EPF, ELSS)
- 80CCD(1B)(₹50K — NPS)
This gives us a pretty realistic look at how much you can build and save — at different income levels and investment commitments.
🧵 Meet the Investment Options
🟢 EPF — The Reliable One
- ~8.25% return
- Tax-free under 80C
- Auto-invested for most salaried employees
- Locked till retirement (some flexibility)
🟠 NPS — The Long-Term Tank
- ~9% return
- Lock-in until age 60
- ₹50K extra deduction under 80CCD(1B)
- Great for retirement-focused investors
🟣 ELSS — Equity + Tax Saving
- ~12% return (post-tax: ~10.8%)
- 3-year lock-in
- Eligible under 80C
- LTCG above ₹1L taxed at 10%
⚫ Mutual Funds — The Flexible Growth Engine
- ~12% return (post-tax: ~10.8%)
- No tax deduction
- Highly liquid
- Great for long-term wealth growth
📊 Simulation Results (10-Year Corpus)
Let’s say you invest 10% of your salary annually for 10 years.
💡 Visual Breakdown by Salary
📈 ₹20LPA Investment Simulation
📈 ₹50LPA Investment Simulation
📈 ₹1Cr PA Investment Simulation
💬 So What Should You Actually Do?
Here’s what I recommend if you’re earning:
- ✅ ₹20L–₹50L:
— Max out 80C with EPF + ELSS
— Add ₹50K in NPS for extra tax deduction
— Put remaining surplus in Mutual Funds
- ✅ ₹1Cr+:
— Max out all deductions
— Use NPS for retirement-focused long-term growth
— Build a large exposure to Mutual Funds for growth and liquidity
🧠 TL;DR
It always makes more sense to go for Mutual funds, given the historical returns, even though you pay taxes upfront and while withdrawing.
Guess where I put my $$$?
🤖 A Tiny Disclaimer
My friend ChatGPT helped me with these simulations.
If something looks off, let’s just agree to blame OpenAI… and then migrate to whatever the next shiny AI tool is 😉
🍛 The Investing Thali
Think of this as a thali — a balanced plate.
A little NPS for the future, some ELSS for spice, EPF as the staple, and mutual funds for flavor and flexibility.
Want this for a 20-year horizon? Or with inflation included? Just ping me.