Smart Tax Savings Guide

Save Income Tax using Smart Tax Saving Guide from Integrity

Are you looking to save some tax? Your first port of call should be Section 80C of the Income Tax Act. Section 80C provides for deduction from Gross Total Income for certain eligible investments and payments. Following is the list of instruments which can be used for Tax savings

  • ELSS funds( Equity Linked Saving Schemes)
  • Health Insurance
  • Life Insurance
  • Home Loan
  • ULIP ( Unit Linked Insurance Plan)
  • PPF
  • FD
  • RD
  • NSC

Instruments available

ELSS funds:

ELSS is a type of diversified equity mutual fund which is qualified for tax exemption under section 80C of the Income Tax Act, and offers the twin-advantage of capital appreciation and tax benefits. It comes with a lock-in period of three years.

A Person can start investing in this component with min amount of Rs.500/-

Instrument Lock In Period
ELSS 3 Years
Bank Fixed Deposit 5 Years
PO Time Deposit 5 Years
NSC 6 Years
PPF 15 Years (Partial Withdrawal)

Health Insurance:

Health insurance is a type of insurance coverage that covers the cost of an insured individual's medical and surgical expenses. For the premium paid income tax benefit is available to the main proposer under section u/s 80D of I.T. act

Life Insurance :

A life insurance policy is a contract with an insurance company. In exchange for premiums (payments), the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries in the event of the insured's death. Or upon the completion of Full term provides lump sump amount of Insured value + Bonus to the insured.

Life Insurance products varies from :-

  • Term Insurance
  • Child Plan
  • Saving Plan
  • Retirement Plan

In this category ,for the premium paid income tax benefit is available to the main proposer under section u/s 80D of I.T. act

Unit Linked Insurance Policy (ULIP):

  • Premium paid for ULIP is eligible
  • Maximum premium eligible is restricted to 20% of sum assured
  • If policy is surrendered within 5 years of commencement, no deduction in respect of the premium paid is allowed. Moreover the aggregate amount of the deductions allowed in respect of such policy in the preceding years is added to the income of the year in which policy is surrendered
Home Loan :

The principal amount in the repayment of a home loan can be added to the 80C limit of Rs1 lakh for tax savings. The interest component of home loans is allowed as deduction under Section 24 B for up to Rs1.5 lakh in case of a self-occupied house. In case the house is in the joint name of your spouse and you (joint loan), each one can avail of Rs1.5 lakh interest component deduction

For joint loan and self-occupied home, it is important to show the loan repayment by both husband and wife as they can avail of Rs1.5 lakh each on loan interest deduction. If the EMI (equated monthly instalment) is being paid from one account by ECS (electronic clearing service), pay your contribution of loan repayment to your spouse by cheque. It will help in case of IT assessment. In case your spouse does not have any income, only you can take Rs1.5 lakh loan interest deduction.

Public Provident Fund account (PPF) :

  • Ideal investment option for both salaried as well as self employed classes.
  • Non-Resident Indians (NRIs) are not eligible.
  • Investment up to INR. 1,00,000 per annum qualifies for IT Rebate under section 80 C of IT Act.
  • Loan facility available from 3rd financial year upto 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011.
  • Withdrawal permitted from 6th financial year.
  • Free from court attachment.
  • An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons.
Type of Account Minimum Invstment Maximum Investment
Public Provident Fund (Individual account) Rs.500/- in a Financial Year Rs.1 Lakh in a financial Year

Fixed Deposit (FD) :

Fixed deposits are a high-interest-yielding Term deposit offered by banks in India. The most popular form of Term deposits are Fixed Deposits, while other forms of term Deposits are Recurring Deposit and Flexi Fixed Deposits (the latter is actually a combination of Demand deposit and Fixed deposit).

Tax benefit is given up to Rs.1 Lakh only if it is fixed deposited for at least 5 years and the owner of this FD can’t terminate this before the completion of Tenure


  • Customers can avail loans against FDs up to 80 to 90 per cent of the value of deposits. The rate of interest on the loan could be 1 to 2 per cent over the rate offered on the deposit.
  • Resident of India can open these accounts for a minimum or 3 months.

Recurring Deposit (RD) :

  • Any individual (a single adult or two adults jointly) can open an account.
  • Advance Deposits earn rebate.
  • Four defaults are allowed.
  • Defaults can be paid within two months.
  • Part withdrawal facility available.
  • Premature closure allowed after three years.
  • Pay Roll Savings Scheme is also available for employees of various Establishments.
  • Investment up to INR. 1,00,000 per annum qualifies for IT Rebate under section 80 C of IT Act.

National Saving Certificate (NSC) :

  • Scheme specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses.
  • No maximum limit for investment.
  • No Tax deduction at source.
  • Certificates can be kept as collateral security to get loan from banks.
  • Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act.
  • Trust and HUF cannot invest.
  • Minimum INR. 100/- No maximum limit available in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-.
  • A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor.
  • Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 236.60 after 10 years.

Buy National Savings Certificates (NSCs) every month for Five years – Re-invest on maturity and relax - On retirement it will fetch you monthly pension as the NSC matures.

Parameter PPF NSC ELSS
Tenure 15 years 6 years 3 years
Returns (Compounded Annually) 8.80% (Compounded half-yearly) 8.60 to 8.9% Not assured dividends/ returns
Minimum investments Rs.500 Rs.100 Rs.500
Maximum investments Rs.1,00,000 No limit* No limit*
Deduction under Section 80C Rs.1,00,000 Rs 1,00,000 Rs 1,00,000
Taxation for interest Tax free Taxable Dividends and capital gain tax free
Risk Profile Conservative Conservative Moderate