Various tools for saving Income Tax

Income Tax is a heavy load on every tax payer. Various sections of income tax law deals with deductions for tax such as 80C, 80D, 80E etc. Maximum limit of 80C head is Rs.1,50,000. Here are various tools coming under section 80C, 80D, 80E etc. to reduce your Income tax burden.

Dec 6, 2022 - 16:46
Dec 6, 2022 - 12:05
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1. Life Insurance Policy

LIC (Life Insurance Policy) is a contract between insurance company and an insurance policy holder where a company promises to pay an assurred sum of money to policy holder upon death or after a certain period of time. Maximum limit of deduction that can be claimed by LIC is Rs.1,50,000.

2. Public Provident Fund scheme

PPF (Public Provident Fund Scheme) is a combination of savings, returns and safety. Investment in PPF offers interest income and returns. Both Interest income and returns are tax free. Investment in PPF also serve as a tax saving tool upto a maximum limit of Rs.1,50,000.

3. Equity Linked Saving Schemes

ELSS (Equity Linked Saving Schemes) is nothing unique but a part of mutual fund investment schemes. Investment in ELSS can give a deduction claim upto maximum limit of Rs.1,50,000. Returns in ELSS are purely market based. Both loss and profit can be there according to the market scenario. 

4. Home Loan

Home loan refers to taking loan for purchasing residential house by making that house itself a security to obtain loan. Loan consists of two components: interest and principal. Principal repayment gives a maximum deduction of Rs.1,50,000 while repayment of interest on loan gives a maximum deduction of Rs.2,00,000. It is considered as best tax saving tool as it creates an asset by saving taxes.

5. Unit Linked Insurance Plan

ULIP (Unit Linked Insurance Plan) is a combination of investment to give returns as well as insurance cover plan for family in case of unfortunate event. Investment in ULIP gives a maximum claim of deduction of Rs.1,50,000.

6. Medical Insurance

It reimburses the expenses incurred due to health illness or any kind of injury. These expenses could be related to hospitalisation costs,medicines or medical consultation fees. Maximum deduction allowed is 25,000 Rs while for senior citizen it is 50,000 Rs. Insurance premium can be in any mode other than cash.

7. Loan for higher education

Loan for higher education can be claimed as deduction even when you have taken an education loan for your spouse, children.The benefit is available for a maximum of 8 years or till the interest is paid.

8. National saving certificates

National saving certificate is a type of small savings bond scheme with a lockin period of 5 years. Maximum limit of deduction that can be claimed is 1,50,000 Rs.

9. National Pension scheme

NPS(National pension scheme) generates the habit of saving for retirement amongst the people. Lockin period is till the age of 60 years. Maximum limit of deduction that can be claimed is 1,50,000 Rs.

10. Sukanya Samriddhi Yojna

It is a part of "Beti Bachao Beti Padhao" campaign. This scheme has a lock-in period of 21 years or the age till the girl gets married after 18 years of her age. Maximum amount that be claimed as deduction is 1,50,000 Rs.

11. Donation

Some funds prescribed by goverment are eligible for deduction upto 100 Percent. While many others for 50 percent. Mode of donation must be in any electronic mode or cheques. Maximum cash donation allowed is 2000 Rs.

12. Jeevan Akshay

It is a type of LIC plan only. In this scheme permium is paid lumpsum. After death of the insurer the amount is paid to the spouse. Deduction can be claimed at maximum of Rs.1,50,000.

13. Post Office scheme

It is a type of saving deposit scheme provided by the post office. It has a higher interest rate on deposits than other saving accounts. Annual investment in post office account eligible for deduction is Rs.1,50,000.

14. Infrastructure Bond

These bonds are issued by the government to raise money for the infrastructure projects. Interest income on these bonds is fully taxable. Maximum limit of deduction allowed is Rs.20,000.

15. Tax saving FD’s

Tax saving FD is a fixed term deposit only. These kind of FD's have lock in period of 5 years. Maximum amount of deduction allowed is Rs.1,50,000. 

16. Employee Provident Fund

It is a type of saving plan for the benefit of employees. Amount invested is paid to employees post retirement or after leaving the organisation. Contribution to EPF can be claimed as deduction for maximum amount of Rs.1,50,000.

17. Group Insurance scheme (GIS)

GIS (Group Insurance Scheme) is a contract that covers many people in a single contract. This is good in case employer wants an insurance for his number of employees. Premium paid on group insurance policies are eligible for deduction under section 80C.

18. Senior citizen savings scheme

Senior citizen saving scheme is a saving tool for individuals above the age of 60years. The aim of the scheme is to provide stable income post retirement. Scheme offers good rate of ineterst. Deduction allowed upto a limit of Rs.1,50,000.

19. Medical Expenditure

Every person has to incur some health expenditure in day to day life either for themselves or for parents. 80D provides the deduction for these medical expenditures.

20. Contributions to political parties

Contributions to political parties can be claimed as deduction under section-80GGC. 100 percent of the amount contributed can be claimed as a deduction.