Investment options that will save tax – The ultimate guide

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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 24 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(2)(i) 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 20% of sum assured. Photocopy of receipt for the premium paid during the current financial year 2016-17. In case if the due date is of Mar’16, then last year copy can be attached for reference’s.
2 Public Provident Fund – 80C(2)(v) 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.2016-17. or
2. Photocopy of first page and transaction page of PPF account pass book.
3 National Savings Certificate – VIII Issue – 80C(2)(ix) “1. Subscription to National Saving Certificate – VIII issue.
2. Accrued interest on NSC of previous years.”
Actual amount subscription and accrued interest, subject to max. 1.5 Lac. 1. Photocopy of national saving certificate taken during the financial year 2016-17.
2. Statement of accrued interest calculation.
3. Statement should include – Certificate number, date of deposit, amount of deposit, interest etc.
4. Copies of the certificates included in statement mentioned above.
4 Unit Linked Insurance Plan – UTI – 80C(2)(x) 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 2016-17.
5 Unit Linked Insurance Plan – LIC Mutual Fund – 80C(2)(xi) 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 2016-17.
6 Units of Mutual Fund or UTI (ELSS) – 80C(2)(xiii) 1. Amount deposited in equity linked saving scheme of mutual fund.
2. The scheme should be approved by 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 2016-17.
7 “Contribution to notified Pension Fund – Mutual Fund – 80C(2)(xiv)
(UTI Retirement Benefit Pension Fund)”
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.2016-17.
8 Tuition Fees – 80C(2)(xvii) 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.
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.
9 Re-payment of Housing Loan Principal – 80C(2)(xviii) 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 admission fees, cost of shares, initial deposit and cost of renovation, ulteration 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).
10 Term Deposits – 80C(2)(xxi) 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.
11 Notified Bonds – 80C(2)(xxii) 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.
12 Post Office Time Deposits – 80C(2)(xxiv) 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. Photocopy receipts / copy of certificate or pass-book showing amount paid during F.Y.2016-17.
13 Contribution to Pension Fund – Insurer – 80CCC 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. Photo receipt for the amount paid during the current F.Y. 2016-17.
14 Medical Insurance Premium –
For Spouse and Children – 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.
Actual amount of premium paid, subject to max. Rs.25,000/-. Copy of Premium paid receipt.
15 Medical Ins. Premium –
For Parents – 80D(2)(b)
“Medical Ins. Premium –
For Parents – 80D(2)(b)”
Actual amount of premium paid, subject to max. Rs.25,000/-.
If amount paid for senior citizen, then additional of Rs.5,000/-.
Copy of Premium paid receipt.
16 “Exp.on maintenance including medical treatment –
For Handicapped Dependent with disability – 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.
2. Copy of certificate issued by approved medical authority in prescribed form.
17 Interest on Education Loan – 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 recogninsed by Central / State Government or local authority.
1. Any amount paid towards interest during F.Y.2016-17. Copy of Certificate issued by the financial institution certifying payment of interest for FY 2016-17.
18 Interest on Housing Loan – 24(b) 1. Capital should be borrowed by the employee.
2. Capital 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 as per attached format 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.
19 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 calender years.
4. Family includes spouse, children, parents, brothers and sisters.
5. Current block is –
01.01.2014 to 31.12.2017
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.
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.”
20 House Rent Allowance – 10(13A) 1. Expenditure incurred on payment of rent for residential accommodation. As per Income Tax Act,1961. 1. Original rent receipts.
2. Copy of leave and license agreement.
3. Wef FY 2014-15 those paying more than Rs 8,333 as HRA(rent) every month, 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.
21 Medical Expenditure -10(15) 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/- Original bills of expenses incurred.
22 Sec 80U – Deduction in case of a person with disability Deduction in respect of permanent physical disability including blindness to taxpayer 1. 40% disability RS 50,000/- 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.
23 80DDB -For medical treatment of self or relatives suffering from specified disease For medical treatment of self or relatives suffering from specified disease 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 patiet 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.
2. Copy of certificate issued by approved medical authority in prescribed form.
3. Assesse shall have to submit certificate in Form No10-I from prescribed specialist working in government hospital.
24 Equity Savings scheme notified by the Central Governement – 80CCG The gross total income of the assessee for the relevant assessment year shall not exceed ten lakh rupees.The investment is locked-in for a period of three years from the date of acquisition Fifty per cent 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.
25 Deduction in respect of contribution to pension scheme of Central Government – Sec. 80CCD Under this scheme, subscribers invest in a fund chosen by them and at the time of retirement they get a lump sum amount depending on the performance of that fund. Many banks are registered with Pension Fund Regulatory and Development Authority (PFRDA) to provide NPA-related services to individuals. NPS account can be opened to anyone from 18 years to 60 years of age 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.
26 Interest Home on Loan – Additional – Sec. 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 houise 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 2016-17 onwards.
Actual amount paid towards interest Rs.50,000/- which ever is less. Certificate issued by the financial institution certifying payment of interest.
27 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 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 Copy of Bank or Post Office Saving passbook.
28 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.  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.
29 Previous Employer Income (Those employee joined in between the current FY 2016-17 for them this is applicable) Employee who change their JOB is require to ‘Disclose’ their income of Previous Employer to your Present Employer. This will help present employer to calcualte the Income tax for entire year and can also adjust any excess and shortfall. 1. Form 12B : This is a declaration from employee and it contains the TAN of the employer, PAN of the employee, period of employment in the previous company and the details of salaries.
2. Previous Employer FnF tax computation.

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.