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TAX SAVING INVESTMENTS
Tax Saving Investments
Your guide to tax saving investments
- Investments/expenses eligible for deduction up to Rs 1,50,000 under section 80C of Income Tax Act, 1961
- Medical insurance and expenses eligible for deductions (Section 80D)
- Charities or donations eligible for deduction
- Additional deduction on affordable housing (Section 80EEA)A
- Education loan taken for higher studies (Section 80E)
- Electric vehicle loan (Section 80EEB)
- Deduction for rental payments (other than HRA)
- Deduction for savings bank interest (Section 80TTA)
- Deduction for savings bank and fixed deposit interest for senior citizens (section 80TTB)
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A) Investments/expenses eligible for deduction up to Rs 1,50,000 under section 80C of Income Tax Act, 1961:
a) Investments
| Tax saving investment | Interest (Return) | Period of lock-in |
|---|---|---|
| Public Provident Fund (PPF) | 7.1% p.a. | 5 years |
| Bank Fixed Deposit | 5% to 6% p.a. | 5 years |
| National Savings Certificate (NSC) | 0.068 | 5 years |
| Sukanya Samriddhi Yojana | 7.6% p.a. | SSY deposit duration is 15 years and maturity after 21 years from date of opening of account |
| ELSS (tax saver mutual funds) | Varies with the MF | 3 years |
| Unit Linked Insurance Plan (ULIP) | Varies with the ULIP | 5 years |
| Senior Citizen Savings Scheme (SCSS) | 0.074 | 5 years |
| Fixed/Time Deposit with Post Office | 0.067 | 5 years |
| NPS contribution | Varies as per fund investments | 3 years |
| Note: NPS contribution is also eligible for additional deduction of Rs 50,000 under section 80CCD(IB) |
b) Expenses
| Tax saving expenses | Period of deduction | Conditions attached |
|---|---|---|
| Life Insurance premium payments | Term of the insurance policy | Deduction restricted to 20% of capital sum assured |
| Stamp duty, registration charges and expenses on transfer of immovable property | Deduction based on actual payment | |
| EPF contribution/deduction from salary | Annual deduction based on EPF contribution | N.A |
| Housing loan repayment | Tenure of housing loan | Property should not be transferred before 5 years from the year of obtaining possession |
| Children’s tuition fee payments | Annual deduction based on actual payments | Any two children of the individual |
| Deferred Annuity payments | Deduction based on actual annual payment | N.A |
NOTE: Deduction under section 80C is available only to Individual or Hindu Undivided Family (HUF)
Deduction available only to Individual or HUF
| Taxpayer entitled to deduction | Amount | Conditions |
|---|---|---|
| Individual paying medical insurance | Rs 25,000* | Self and family (inclusive of Rs 5,000 allowable for preventive health check-up) |
| Rs 25,000* | Parents | |
| HUF paying medical insurance | Rs 25,000* | Any member of the HUF |
| Individual incurring medical expenditure or HUF incurring on any member | Rs 50,000 | Self or any member of family or HUF (senior citizen with no medical insurance) |
| Rs 50,000 | For any parent (senior citizen with no medical insurance) | |
| Individual or HUF paying medical insurance and incurring medical expenditure | Rs 50,000 | For self and family; or for members of HUF |
| Individual paying medical insurance and incurring medical expenditure | Rs 50,000 | For parents |
C) Charities or donations eligible for deduction
-
- Donations to specified funds which include PM Cares Fund, National relief fund, specified State Government funds are entitled to 100% deduction
- Donations to other charitable organisations which are recognised/registered are entitled to a 50% deduction
D) Additional deduction on affordable housing (Section 80EEA)
A deduction of Rs 1,50,000 towards interest paid on loan taken for affordable housing:
-
- Stamp duty value of the residential house property does not exceed Rs 45 lakh;
- The taxpayer does not own any other property as on the date of sanction of the loan;
- The loan sanction is from a financial institution between 1 April 2019 and 31 March 2021
Deduction is available up to repayment of the loan.
Interest on loan taken for higher studies for self or of relative (spouse or children) for 8 years. The deduction is available for loan taken from a financial institution or any approved charitable institution.
A deduction of Rs 1,50,000 towards interest paid on loan taken to purchase an electric vehicle. Loan should be from a financial institution sanctioned from 1 April 2019 to 31 March 2023. Deduction is available up to repayment of the loan.
A taxpayer not claiming the benefit of HRA exemption can claim deduction for rent paid for self-occupied property. The deduction under section 80GG is lower of:
-
- Rs 5,000 per month which is Rs 60,000 annually
- 25% of total income
- 10% of total income
The deduction under section 80GG is subject to conditions:
-
- The taxpayer or their minor child should not own any residential accommodation at the place where they reside or perform duties of office or employment or carries on business or profession;
- The taxpayer should not own accommodation which is self-occupied t any other place.
Interest income from savings bank account is eligible for deduction up to Rs 10,000. The deduction is for entire savings bank interest income from all bank accounts held by you during the year.
Senior citizens (aged 60 years and above) are entitled to a deduction up to Rs 50,000 for interest income from savings bank account and fixed deposit accounts with banks and post office.