With the tax season fast approaching, I thought I’d do a post with the tax rates for the current year, and the investing options that can avail you tax deductions. These don’t include things like loss from house property, or disability deductions, but are deductions that can be claimed under Section 80C or 80CCF when you invest a certain amount in some tax saving instruments.
First, let’s take a look at the tax slab for the current year:
Income Tax Slab:
| Income | Tax Rate |
| Up to 1,60,000 Up to 1,90,000 (for women) Up to 2,40,000 (senior citizens older than 65) |
0% |
| 1,60,000 – 5,00,000 | 10% |
| 5,00,000 – 8,00,000 | 20% |
| More than 8,00,000 | 30% |
Education Cess: 3% of income tax & surcharge if the taxable income is more than 160,000.
The cess is levied on the tax itself, so whatever is your final tax liability – take 3% of that and add to your tax to arrive at the tax due.
Tax Saving Schemes
The table that follows lists out tax saving schemes that entitle you to a reduction on your taxable income.
What this means is that if you have a taxable salary of Rs. 9,00,000 and invest Rs. 1,00,000 in any of these tax saving schemes then your taxable salary gets reduced by 1,00,000, and you pay tax as if you only earned Rs. 8,00,000 in the year.
The maximum investment column in this table indicates that the tax benefit ceases to exist for an amount in excess of what’s indicated there. So, if you invest more than 70,000 in PPF – you will still be entitled to tax benefit on only Rs. 70,000.
Also, note that the combination of these options will give you a maximum tax benefit of Rs. 1,00,000, so if you have already bought insurance worth Rs. 1,00,000 investing another Rs. 1,00,000 for ELSS will not get you additional tax saving.
The only exception to this is the 80CCF Infrastructure Bonds, which reduce your taxable income by Rs. 20,000 over and above the Rs. 1,00,000 saved by the other options.
Regular readers know it all too well, but it’s my duty to remind you that I’m not a tax expert, and in fact hire someone else for my own taxes, so you need to keep that in mind while looking at this list, and consider it nothing more than a starting point.
| S.No. | Name | Maximum Investment | Notes |
| 1 | Life Insurance Premium Paid | 1,00,000 | Policy should either be in your name, spouse’s name or children’s name |
| 2 | Contribution to Public Provident Fund | 70,000 | You can’t add the employer’s contribution to PF under this head. |
| 3 | Investment in NSC (National Savings Certificate) | 1,00,000 | Post office scheme with guaranteed returns. |
| 4 | Contribution to ULIPs | 1,00,000 | Do your due diligence before getting into these. |
| 5 | Contribution to ELSS Mutual Funds | 1,00,000 | Link to a post on ELSS here. |
| 6 | Contribution made to notified pension funds | 1,00,000 | UTI Pension fund is one example of this |
| 7 | Amount spent on children’s education | 1,00,000 | For tuition fee only, and a maximum of 2 children |
| 8 | Annual Repayment of Housing Loan | 1,00,000 | There are a lot of conditions in this that I’m not fully familiar with, so you need to consult an expert before banking on this. |
| 9 | Tax Saving Fixed Deposits | 1,00,000 | Term of 5 years (Full post here) |
| 10 | Premium Paid Towards Jeevan Suraksha | 1,00,000 | Pension plan with annuity for life. |
| 11 | Section 80CCF Infrastructure Bonds | 20,000 | This is over and above the 1,00,000 mentioned above. (Full post here) |
After writing this post I also created a detailed graphic that makes these tax saving schemes easy to understand, and also includes the details on home loan and education repayment which are not present here. You can view the 80C tax saving infographic here.
Update: Premium Paid towards Jeevan Suraksha does not come under Section 80C benefits as listed in this post, but is covered under Section 80CCC.
Thanks to R P Sarathy, and Nilesh Gupta for pointing out the error, and my sincere apologies for my mistake.
Hi there,
I have invested 10K in MANAPPURAM FINANCE LIMITED – NCD this year, does this come under tax deduction.
I am working in a private company and recently started NPS (New Pension Scheme) through ICICdirect.com does investment done in NPS comes under tax deduction.
Thanks in advance.
Regards,
Mahantesh
Hi Mahantesh
NCD – No. Even interest earned is taxable
NPS (New Pension Scheme) Yes
Hi,
I have one doubt, If suppose I am earning 10k from share market(i.e in Stocks Or Derivatives) on monthly basis, for that I need to pay tax? (consider this is my side Income)
If I needs to pay tax it will come under which section?
Kindly clarify the same.
Thanks In Advance
They will be charged as short term capital gains.
Actually I didn’t get you. This short term capital gains will come under which section(80c,80ccf,etc..)?
tax payable on income as short term capital gain with rate of 15%.
If I buy shares worth 1 Lakh and sold at value of Rs. 1,30,000 within 1yr then tax payable is 15% of net profit i.e. 0.15*30,000 = Rs.4500.i.e. short term capital gain.
One can offset short term capital gain against short term capital loss,but not with long term capital loss.
During the budgetary speech of 11-12, it was announced by the H’ble Finance Minister that NSC,ELSS and ULIPS will not be applicable towards saving of the income tax under IT section 80C. Now I want to know that whether these announcements have been implemented or not.
Jaiwardhan/RNC.
You can still take advantage of 80C this year Jaiwardhan. They will cease to be useful when Direct Tax Code (DTC) is implemented, which is expected next year, but let’s see if it actually happens next year or not.
Sir,
Please design a tax saving portfolio for me. My monthly income is 50K.
Dear Kirti,
It is difficult to give u a portfolio structure without understanding your expenses, liabilities, monthly saving capacity and age….
From the information given by you invest 8334 pm in various tax saving schemes to avail benefit of 1 lac for sec 80 C.
Rest can be advised only if there is proper data provided.
Kirti – this can’t be done in the comments section of a blog. You need to either hire someone or get up to speed on some of the investment options and concepts and do it yourself.
Thanks Manshu!!
The sublimits in LIC premium was my actual question. Sorry for not putting the same in proper words due to lack of my commerce knowledge.
Now I understand that in order to get “maximum” benefit/tax shied under 80C , i do not need to make anymore investments. Correct me if I am wrong.
Again thanks for your time and patience
Brgds
Manish
Thanks for your response, and yes that’s correct.
Dear Manshu,
My question was whether the LIC premium paid is fully taken for 80C tax deductions. Secondly , whether all the LIC policies’ premiums are taken for these calculations or only some particuler policies,
I apologize I’m not sure I still understand the question – by saying that LIC premium paid is fully taken for 80C deductions – do you mean to ask if there is a kind of a sub – limit within the 80C limit where they say that only up to 50K investment in LIC will be allowed for exemption….something like that?
If so, then no, I don’t think there is a limit like that.
And I do believe Jeevan Shree comes under 80C, and so does any other life insurance policy from LIC.
Hi Manshu,
I have following 2 questions:
1.)I have 3 LIC policies as follows:
In My name : Premium 29000/- ( Jeevan Shree)
My Wife’s name :Premium 39000/- (Jeevan Shree)
My wife name : Premium 28000/-
My Daughter’s name :Premium 7000/-
Pls advice if I need to invest any more for tax deduction under u/s 80C, 80CCC, 80CCD.
2.) Can I Claim my Parent’s ( Father retired and on pension, mother homemaker) medical bills for deductions under 80D.
Brgds
Manish
Since the premiums exceed a lakh I don’t think you can do anything under these other sections. You can invest 20K under Infra bonds that are covered in 80CCF. I don’t know about the 80D question I’m afraid.
Hi Manish
Your question about Section 80D is not clear.
In section 80D investments made for the payment of health insurance premiums (premium paid for mediclaim type policies), qualify for tax deduction and not medical bills. Further medical bills are of many types like bills of medicine purchased in normal course, hospital treatment (of in-patient, in nature) bills, medicines purchase bills and diagnostic bills during hospital treatment (of in-patient nature), bills of diagnostic centers like testing of blood, urine etc, X-ray bill in normal course etc.
Further what is the nature of your job like salaried, professional, self employed, business etc. If salaried, do you have medical reimbursement facility from your employer.
Do you contribute to health insurance. If your question is related to health insurance premium (section 80D), then do you pay premiums for your parents from your taxable income. Do write the age of you parents.
Umesh
I have Fixed Deposits with banks, the TDS in F.Y was approx. 25,000/-
I have no other taxable income other than dividend income of shares which is tax free
Please let me know the way of tax rebate to get this 25,000/- TDS back,
will 5 year Fixed Tax Saving Deposit be the best way to claim refund of TDS ? ?
Can I also claim tax refund by investing 25,000/- in INFRA BONDS ? ?
Dear Nissarul,
The Tax rebate can be obtained by filing the return and claiming the rebate on the TDS done as applicable in your case.
A 5 yr Tax Saving FD will provide you deduction under sec. 80C and not provide you any Rebate of TDS. There are also other means to save tax u/s 80C like interest payment of a Home Loan, HRA, ELSS, NPS, PPF investments, etc apart from Tax saving FDs.
Infra Bonds are used to get a tax deduction on total taxable income, not to Claim refund. The Limit of Investing in Infra bonds for tax savings is 20000. Beyond that you can invest but will not get tax savings.
Kindly read the topics on this thread as well as on this forum as well as Valuresearch online, moneycontrol or http://www.tflguide.com/ to name a few.
In my opinion, take a one time consultation of a tax consultant to resolve your queries and guide you through the process of claiming rebate and filing returns. Ideally the fees for this should be less than Rs. 1000.
-Mihir
Senior citizen scheme deposits are subject to payment of income tax on interest and TDS as usual, but with the added advantage of 88c benefits upto 1 lakh subscription in a particular year (alongwith other 88c investments).
Hi,
I am a housewife and my husband lives abroad. This year he had sent me some money for family and other expenses, of which I have deposited some 1 lac in an FD.
Now, will there be tax on the interest rate? I do not have any earnings. Answer would be much appreciated. Thanks
Dear Malar,
Incase the bank deducts tax at source, get a TDS certificate from the bank and you can claim refund of the same amount while filing your return.
You can also get more information form the bank teller or Manager.
Rgds,
Mihir
thanks for the valuable information. till to date, i dont know about the banks also have offering fd’s for tax saving. no, i have one question. I have nearly 15 lacks of fd’s in various banks. i am getting salary of 1.5 lack p.a as salary. but, i am not filing any returns form. please sujjest me to get higher returns and portfolio . except the fd’s i have no investment and nodebts. be pleased to consider my request
Dear Narayana,
Since your salary is 1.5 lacs p.a., you dont need to pay tax, but if you have a PAN card, it would be better to file your returns to avoid any hassles in the future.
Since you have invested only in FDs, you can invest in NCDs or debt funds to get relatively higher returns and protect your capital. If you want much higher returns you can buy Mutual funds but they also carry risks. If you have knowledge of stock trading you can put your money in sound stocks for long term investment, but the risk factor is much higher there. You can read more articles on Onemint, moneycontrol, http://www.tflguide.com/ , or other such knowledge sharing sites, or consult a financial adviser.
Rgds,
Mihir
thaks mihir, my mother gave me that money(she is getting reular income from govt. as pension and other benefits) on certain occassions. i have only few recipts for trnsferring money from my mother’s account to mine.Is there any problem for me. what is the mode of transfer of money and what care should i have take while accepting money from my mother in future. I got PAN card last year. but, i have not filed returns so far. what should i do. mihir, one more doubt. how to invest in NCDs. please provide information if any. i am filng form 15-g every towards TDS in one bank as i have invested nearly 5 lack in that bank as FD. remaining, i ahve invested in various banks(below one lack).
be greatful to you
Narayana,
To keep the record clean, always accept the money from your mother in cheque form if possible.
For most of your concerns regarding the same I will suggest you consult a tax consultant, I am not one, Infact I am just a common person like most others on this forum sharing and advising my learnings.
If there is anybody on the forum who can extend help to narayana kindly come forward.
FOr the Question of NCDs, you need to open a Demat account, you can open this account with most of the Banks like SBI, HDFC, Kotak, ICICC, AXIS or through a brokerage house like Kotak securities, Edelweiss etc. Once you have an Demat account and an online trading account, you can transfer money online form you bank to the trading account and invest in NCDs.
For best approach, consult a financial advisor, pay him the fees to suggest good investment and tax efficient strategy. Periodically Monitor your investments and MOST IMPORTANTLY continuously gain knowledge for Financial freedom.
-Mihir
Mihir – your comments have been fantastic, and I wanted to thank you for them! Awesome – thanks!
Manshu,
Its a nice platform put up forward by you guys, it is through such forums we all can extend our knowledge as well extend the advice to others, its always mutual 🙂
Hi,
Under 80D can i get tax exemption for me (Rs. 15000/-) and for my parents (Rs. 15000/-) separately ?
Thanks
Interest on schemes other than PPF is taxable or not
I am not sure about the Senior citizen schemes, but for most other interest based tax savings schemes there is tax on interest earned.
Rgds,
Mihir
Tax on interest earned on P.O. Sr. Citizen Scheme is also taxable its only the investment made during the year under the scheme which is deductible from your gross income.
Lets say I invested Rs. 1 lakh in Feb 2010 in a company FD at 13% for 3 years, with the principal plus accumulated interest being paid out on maturity. I am supposed to declare this as part of my income only when I actually receive the amount on maturity, right? Am I liable to include the interest accumulated annually, as part of my taxable income in every FY from 2010-2013? I thought I would need to put this in my ITR only at the end of 3 years but I was confused since the company where I made the FD deducts TDS at the end of every year and the same reflects in my Form 26AS.
If you do not have interest payment flow statement or if you are not able to calculate it manually,demand interest paid certificate from company.I think,you needs to show income each year as done in bank fixed deposits.
INTEREST ON Rs70000 PPF IS TAX FREE WHAT ABOUT INTEREST ON REST Rs30000 INVESTED IN POSTAL SCSS IS IT TAXABLE
If i sell my old gold or my father gives u 50000 rs as gift ,i make 50000 as fd in bank in a particular financial year, then do i have to pay tax and include those 50000 in our taxable income, do we have to include its intrest to taxable income, do any proof regarding that we need to keep, if there is no tax we need to pay?
I had a PPF account ,which I did not pay for 2 years, can I revive the same.
yes Ana, you can revive the same. you need to go to the bank where you have the PPF account and speak with the concerned person to revive the account. Some penalty amount may be charged depending on the bank policy.
I thought Post Office Sr. Citizens Scheme which fetches 9% interest p.a., and has a tenure of 5 years, is also eligible for deduction under 80C. Correct me if I am wrong
Hi
The scheme is eligible for deduction u/s 80C of IT Act. See Link Below
http://www.indiapost.gov.in/Netscape/Banking.html
In the proposed DTC the Sr. Citizens Scheme (P.O) has not been included under Sec.80 C.
Does this mean that 5-year bank deposits in a PSU Bank only qualifies for deduction upto 1 lac under this Secn. Also the enhanced limit from 20K to 50K is this meant only for investments against infrastructure bonds? Thanks Manshu . You are doing an incredibly good job.
Proposed DTC does away completely with 80C and any exemptions that come with it, so things like ELSS, PO savings etc. will not quality for these from next year. Not this year, next year. This year things remain the same.
I’m not sure I don’t understand the rest of the question…..there might be some context I’m missing – sorry!!!