Investment options that will save tax – The ultimate guide


Are too many deductions in your salary eating into your take home package? If you’re looking for investment options that will save tax while and make sure you’re invested wisely, then this guide is for you.

The table below contains a list of 32 investment options that will reduce your taxable income and in turn the tax you pay.  You may choose a combination that works best for you.

Sr.No Particulars Eligibility / Coverage Amount of deduction Proofs to be submitted during actual submission
1 Life Insurance Premium – 80C Premium paid on life of self, spouse, children (Including minor / major / married / unmarried children). Actual amount paid, subject to max. 1.5 lac and premium should not exceed 10% of sum assured. Photocopy of receipt for the premium paid during the current financial year 2017-18. In case if the due date is of Mar’18, then last year copy can be attached for reference’s.
2 Public Provident Fund – 80C Amount deposited in Public Provident Fund account in the name of self, spouse, children (Including minor / major / married / unmarried children). Actual amount deposited, subject to max . 1.5 Lac 1. Photocopy of payment challan for the F.Y.2017-18. or
2. Photocopy of first page and transaction page of PPF account pass book or bank statement
3 National Savings Certificate – VIII Issue – 80C Subscription to National Saving Certificate – VIII issue. Actual amount subscription, subject to max. 1.5 Lac. 1. Photocopy of national saving certificate taken during the financial year 2017-18.
4 Unit Linked Insurance Plan – ULIP – 80C Premium paid on life of self, spouse, children (Including minor / major / married / unmarried children). Contribution paid for participation in Scheme, subject to max. 1.5 Lac. Photocopy of Receipts / Proof of amount paid during current financial year 2017-18.
5 Equity Linked Saving Schemes (ELSS) 1. Amount deposited in equity linked saving scheme of mutual fund.
2. The scheme should be approved by the Central Government
Amount invested in equity linked saving scheme of mutual fund , subject to max 1.5 Lac Photocopy of receipts / Proof of amount paid during current financial year 2017-18.
Tax Benefit will be applicable only were its mentioned on the Tax Saver Plan
6 Tuition Fees – 80C 1. Amount paid for the purpose of full time education of any two children.
2. It dose not include – development fees, donation or payment of similar nature.
3. Payment should be made to school, college, university or educational institution situated within India.
4. Allowed Admission fees, Exam fees, Computer class fees, Practical fees, Smart class fees.
5. No deduction in available for fees paid for private tuitions, coaching classes, admission in professional courses or any other types of courses
Actual amount paid subject to max. 1.5 Lac. Photocopy receipts of tuition fees (with the address) issued by the school, college, university or educational institution.
All the receipts should belongs to FY 2017-18
7 Term Deposits FD for 5 years or more with banks- u/s 80C 1. Amount deposited in Fixed Deposit with the scheduled bank in accordance with Scheme framed by Central Government.
2. Amount should be deposited for a fixed period of not less than five years.
Actual amount deposited subject to max. 1.5 Lac. Copy of the receipt of amount deposited clearly mentioning that the deposit is under the Scheme notified U/s 80 C.
8 Re-payment of Housing Loan Principal/Registration cost – u/s 80C 1. Repayment of capital borrowed from any financial institution for acquisition / construction of a self occupied property.
2. Also, include payment of stamp duty, registration fees and other cost of transfer of property.
3. It does not include cost of shares, initial deposit and cost of renovation, alteration or repairs of the house.
Actual amount paid subject to max. 1.5 Lac. 1. Copy of Certificate issued by the financial institution certifying re-payment of capital borrowed.
2. In case of co-borrower of the capital, Undertaking should be given for availing benefit of whole amount re-paid.(50% deduction will be given to loans with Joint holders in the absence of suitable undertaking – Refer Annexure – 5).
3. Copy of Flat Agreement for availing benefit of Stamp duty & Registration cost
4. Lender Bank Name and Lender PAN number is compulsory wef FY 2016-17. Without this details your Interest on housing loan will be disallowed.(This details need to be filled in Investment declaration form).
9 Interest accrued in respect of NSC VIII issue – u/s 80C Amount gained in respect of interest accumulated against saving under NSC scheme Subject to max. 1.5 Lac. 1. Copy of national saving certificate taken during previous financial year.
2. Statement of accrued interest calculation.
10 Post Office Savings Bank (CTD) – u/s 80C 1. Amount deposited in an account under Post Office Time Deposit Rules, 1981.
2. The account should be with Post Office for a period of five years.
Actual amount deposited subject to max. 1.5 Lac. Copy receipts / copy of certificate or pass-book showing amount paid during F.Y.2017-18.
11 Pension fund set up by any Mutual Fund – u/s 80C. 1. Contribution to any pension fund set up by any Mutual Fund.
2. The fund should be approved by Central Government.
Amount contributed to the fund, subject to max. 1.5 Lac. Photocopy of account statement showing the units purchased in the name of employee during F.Y.2017-18.
12 Deposit scheme of National Housing Bank (NHB) – u/s 80C Subscription to bonds issued by NABARD as notified by the Central Government. Actual amount deposited subject to max. 1.5 Lac. Copy of the certificate issued by the notified authority for F.Y.2017-18
13 Approved Superannuation Fund – u/s 80C You can confirm from your employer whether your superannuation fund is approved or not. Tax exemptions are available only to approved superannuation funds. Subject to max. 1.5 Lac. Copy of policy and sum approved by concern officer
14 Contribution to Pension Fund – Insurer(80CCC) -u/s 80C Amount paid or deposited to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other approved insurer for receiving pension. Actual amount paid, subject to max. 1.5 lac. Copy of receipt for the amount paid during the current F.Y. 2017-18.
15 Sukanya Samriddhi Scheme New Rules 2016 – u/s 80C Sukanya Samriddhi Scheme can be opened for biological as well adopted girl child. However, limit of maximum number of account is restricted to one account per girl child and a parent/legal guardian can open account for maximum of two girl child. The age limit of girl should be 10 years or less. The contribution/payment made towards Sukanya Samriddhi Account will be an eligible deception u/s 80C up to the threshold limit of Rs.1.50 lakhs 1. Copy of certificate issued by the scheme.
2. Payment receipts for F.Y.2017-18
16 Deduction in respect of contribution to pension scheme of Central Government – u/s 80CCD Tax deductions for contribution to the pension schemes notified by Central Government, i.e., a) National Pension Scheme (NPS)
b) Atal Pension Yojana (APY)
This extra deduction of Rs. 50,000 on NPS will increase the total deduction allowed under Section 80C and 80CCD of Income Tax Act to Rs. 2 lakh. Copy of paid receipt with copy of enrolled policy, this should pertain to FY 2017-18
17 Medical Insurance Premium –
For Spouse and Children – u/s 80D(2)(a)
1. Medical insurance premium paid to keep in force an insurance on health of self, spouse and dependent children.
2. The premium can be paid in any mode other than cash.
1. Actual amount of premium paid, subject to max. Rs.25,000/-.
2. If amount paid for senior citizen, then additional of Rs.5,000/-.
3. Can also claim expenses incurred for preventive health check-ups up to Rs. 5,000/-(This deduction of Rs. 5,000 is not in addition to the maximum deduction).
1. Copy of Premium paid receipt and should pertain to FY 2017-18
2. Original receipts towards claiming preventive health check-ups
18 Medical Ins. Premium –
For Parents – u/s 80D(2)(b)
1. Medical insurance premium paid to keep in force an insurance on health of parents.
2. The premium can be paid in any mode other than cash.
1. Actual amount of premium paid, subject to max. Rs.25,000/-.
2. If amount paid for senior citizen, then additional of Rs.5,000/-.
3. Can also claim expenses incurred for preventive health check-ups up to Rs. 5,000/-(This deduction of Rs. 5,000 is not in addition to the maximum deduction).
1. Copy of Premium paid receipt and should pertain to FY 2017-18
2. Original receipts towards claiming preventive health check-ups.
19 Medical treatment Expenses on handicapped Dependent
For Handicapped Dependent with disability – u/s 80DD
1. Incurred any expenditure for medical treatment including nursing, training and rehabilitation of a dependent with disability.
2. Amount paid or deposited under a scheme framed by LIC or other insurer.
1. Least of – actual amount paid or deposited or expenses incurred or Rs.75,000/- whichever is less.
(Rs.1,25,000/- where the dependent is having severe disability.)
1. Documents evidencing the payment of expenditure incurred or amount deposited in F.Y.2017-18
2. Assesse shall have to submit certificate in Form No10-IA from prescribed specialist working in government hospital.
20 Medical Treatment under specified diseases
– u/s 80DDB
For medical treatment of self, spouse, guardians, children, and siblings suffering from specified disease. For example, cancer, chronic renal failure, Parkinson infection, etc. The complete list of such diseases is included in Rule 11DD. Actual amount paid to the extent of Rs 40,000/-. In case of patient being Sr Citizen (60 to 80 years), amount is Rs 60,000/-, irrespective of the actual expenditure incurred. In case of patient being very Sr Citizen (above 80 years) amount of deduction is Rs. 80,000/- 1. Documents evidencing the payment of expenditure incurred or amount deposited in F.Y.2017-18
2. Assesse shall have to submit certificate in Form No10-I from prescribed specialist working in government hospital.
21 Interest on Education Loan – u/s 80(E) 1. Any amount paid towards interest on loan taken for higher education during the financial year.
2. The loan should be for higher education of self, spouse and children or legal guardian of a student.
3. Higher education means full time studies for any course pursued after passing the Senior Secondary Examination or equivalent as recognised by Central / State Government or local authority.
1. Any amount paid towards interest during F.Y.2017-18.
2. It is available only for 8 years starting from the year in which you start repaying the loan.
Copy of Certificate issued by the financial institution certifying payment of interest for FY 2017-18.
22 Interest on Home Loan – Additional – u/s 80EE 1. Value of residential house does not exceed Rs 50 Lakhs.
2. The loan sanctioned does not exceed Rs. 35 Lakhs.
3. The assesse is a first time home buyer.
4. The assesse does not own any other residential house as on the date of sanction of the loan. This house should be self occupied property.
5. The loan should be sanctioned between 01.04.2016 to 31.03.2017
6. The benefit of this deduction would be available till the time the repayment of the loan continues.
7. This Deduction would be available from Financial Year 2017-18 onwards.
1. Actual amount paid towards interest Rs.50,000/- which ever is less.
Note : This section has been reintroduced effective FY 2016-17.Now the deduction is allowed up to Rs 50,000 per year starting from FY 2016-17 and subsequent years until the loan is repaid
1. Certificate issued by the financial institution certifying payment of interest.
2. For verification purpose, proof copy of ‘Loan Disbursement Letter’ is mandatory to check if loan is disbursed between 01.04.2016 to 31.03.2017.
23 Donations to certain Funds, Charitable Institutions etc.
– u/s 80G
1. Donations made to prescribed funds qualify as a deduction u/s 80G.
2. From Financial Year 2017-18 onwards – Any donations made in cash exceeding Rs 2000 will not be allowed as deduction. Thus the donations above Rs 2000 should be made in any mode other than cash to qualify as deduction u/s 80G.
The various donations specified in section 80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in section 80G. Donation usually need to claim by Individual while filing his personal Income Tax Return. There is separate tab in return where the details of 80G should be mentioned.
24 Deductions is respect of rents paid – u/s 80GG 1. The Individual has not been in receipt of any House Rent Allowance from his employer specifically granted to him which qualifies for exemption under sec 10.
2. The employee does not own any residential accommodation himself or by his spouse or minor child, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession.
Deduction in respect of house rent paid by him in excess of 10% of his total income, subject to a ceiling of 25% thereof or Rs. 5,000/- per month Declaration in Form No. 10BA from employee.
25 Interest income earned from a savings account – u/s 80TTA 1. Rs.10,000 is tax deductible from the gross income.
2.Any interest earned over and above Rs. 10,000 is considered as “Income from Other Sources” and therefore taxable.
Maximum deduction allowed u/s 80TTA is Rs. 10,000. Copy of Bank Statement or Pass Book for FY 2017-18
26 Deduction in case of a person with disability – u/s 80 Deduction in respect of permanent physical disability including blindness to taxpayer 1. 40% disability RS 75,000/- and
2. 80% severe disability Rs 1,25,000/-.
1. Documents evidencing the payment of expenditure incurred or amount deposited.
2. Copy of certificate issued by approved medical authority in prescribed form.
27 Equity Savings scheme notified by the Central Government – u/s 80CCG Deduction under section 80CCG has been discontinued starting from 1st April 2017. However, any individual who has claimed the deduction in Financial Year 2016-17 and earlier years shall be allowed a deduction in Financial Year 2017-18 if he is eligible for the same. 50% of the amount invested in such equity shares to the extent such deduction does not exceed Rs.25,000/- Form A -Declaration to be submitted by the investors to the depository participants for availing the benefits under the Rajiv Gandhi Equity Savings Scheme.
28 Interest on Housing Loan
– 24
1. Housing Loan should be borrowed by the employee himself.
2. Housing Loan should be borrowed for acquisition / construction of a self occupied property.
3. The property should not be let out during financial year.
Actual amount paid towards interest on borrowed capital or Rs.2,00,000/- which ever is less. 1. Certificate issued by the financial institution certifying payment of interest.
2. In case of co-borrower of the capital, Undertaking should be given for availing benefit of whole amount paid as interest.(50% deduction will be given to loans with Joint holders in the absence of suitable undertaking.)
3. Lender Bank Name and Lender PAN number is compulsory wef FY 2016-17. Without this details your Interest on housing loan will be disallowed.(This details need to be filled in Investment declaration form).
29 Loss on Housing Property
– 24
1. Tax benefits, if you own multiple homes and along with multiple Home Loans, then claim tax benefit under this section.
2. The Principal repayment of multiple home loan can clubbed under ‘Re-payment of Housing Loan Principal/Registration cost – u/s 80C’ – Refer point no – 8
Till FY 2016-17 , there was no limit on Interest on home loan on Rented house that was allowed as deduction u/s sec 24. But from F.Y 2017 -18 onwards ,the amount of interest on home loan on rented house is restricted to the extent to which loss from such house property does not exceed Rs 2,00,000/- 1. Certificate issued by the financial institution certifying payment of interest.
2. In case of co-borrower of the capital, Undertaking should be given for availing benefit of whole amount paid as interest.(50% deduction will be given to loans with Joint holders in the absence of suitable undertaking.)
3. Lender Bank Name and Lender PAN number is compulsory wef FY 2016-17. Without this details your Interest on housing loan will be disallowed.(This details need to be filled in Investment declaration form).
4. Self declaration needs to submitted mentioning the details of both the property.(Refer Sheet attached : Loss on Housing Property -24)
5. Copy of Lease agreement for availing rental Income benefit.
30 Leave Travel Allowance (LTA) 1. Amount incurred towards cost of travel on self and family.
2. Travel should be within India.
3. Two journey in block of four consecutive calendar years.
4. Family includes spouse, children, parents, brothers and sisters.
5. Current block is – 01.01.2014 to 31.12.2017.
6. If mode of travel is through road, then A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
Least of actual expenditure incurred on travel or the amount as per act depending on mode of journey, whichever is less. 1. Original air ticket & original boarding pass if journey is by Air travel and should travel in economy class.
2. Original rail tickets , if journey is by rail.
3. Original travel agent bill / original petrol bill & original toll tickets if journey is by Road.
31 Medical Expenditure 1. Amount incurred towards medical expenditure on self and family.
2. Family includes spouse, children, parents, brothers and sisters.
Subject to max. Rs.15,000/- 1. Original bills of expenses incurred and this bills should pertain to FY 2017-18
2. These bills could be for the purchase of medicines from pharmacies and medical shops, or medical treatment taken at public or private hospitals and clinics.
32 House Rent Allowance 1. Expenditure incurred on payment of rent for residential accommodation.
2. For rent paid amount more than Rs.8,333/- pm or Rs 1 lakh annually, for them need to furnish a copy of their landlord’s permanent account number (PAN).
The entire HRA received is not always fully exempt from tax. The least of the following three will be exempt from tax:
i) Actual HRA received through monthly salary.
ii) Actual rent paid minus 10% of basic salary.
iii) 50% of basic salary for those living in metro cities & 40% of basic salary for those living in non-metro cities.
1. Original rent receipts with revenue stamp.
2. Copy of leave and license agreement, this agreement should notarised or registered.
3. Those paying rent amount more than Rs.8,333/- pm or Rs 1 lakh annually, need to furnish a copy of their landlord’s permanent account number (PAN), along with the rent receipts. Else if not provided will not be eligible to HRA exemption.
4. Copy of Address proof.

We hope you can use the investment options above to plan your investment more efficiently.  Here are some additional tips that you can use:

  • Section 80C

Section 80C is probably the most used set of investment options that people use for tax planning. Invest in any of the following up to a maximum of Rs. 1.5 lacs p.a. each.

  1. Life Insurance
  2. Public Provident Fund
  3. National Savings Certificate
  4. Equity Linked Savings Schemes
  • House Rent Allowance

If you pay rent you should definitely claim its tax benefits. The tax deduction you can claim with HRA is the minimum of the following:

  1. Actual HRA received
  2. Rent Paid in excess of 10% of salary
  3. 40% of Salary
  • Medical expenditure

Incurring medical expenses for ourselves and for our families is almost inevitable. You can claim up to Rs. 15,000 in deductions for this purpose.

In addition to these, treatment costs for certain listed diseases can also be claimed under section 80DDB.

We hope this article has all the answers you’re looking for with regards to the investment options you have.