Tax Savings options & Resources

Fixed Deposit
You can save tax by investing in tax saver Fixed Deposits, under section 80C. You can claim a deduction of a maximum of Rs.1.5 lakh by investing in tax saver fixed deposits. There is a lock-in period of 5 years for such FDs and the interest earned is taxable. The rate of interest usually ranges from 5.5% - 7.75%.

PPF (Public provident scheme)
To invest in PPF, you need to open a PPF account at the post office or designated branches of public and private sector banks. You can claim deductions under Section 80C up to Rs 1.5 lakh in a financial year on these deposits.

ULIP (Unit linked insurance plan)
ULIPs are long term investment products that allow you to choose equity funds, debt funds or both. By investing in ULIPs, you can save taxes under sections 80C and 10(10D) of the Income Tax Act, 1961.

National Savings Certificate
National Savings Certificates are a savings bond scheme which encourages primarily small to mid-income investors to invest while saving on income tax under Section 80C. NSCs can be bought by an investor for self or on behalf of minor or with another adult as a joint account.

Life insurance
Life insurance plays an important role inthe individual's financial portfolio offering security to the individual's family in case of an eventuality Regardless of its nature Life insurance, be it traditional (endowment) or market-linked (ULIP), offers tax benefits to policyholders on the premiums paid. Premiums paid towards life insurance are covered under Section 80C of the Income Tax Act up to a maximum of Rs 1.5 lakhs.

Health insurance or Mediclaim
Mediclaim covers expenses incurred from an accident/hospitalization. Mediclaim also covers pre and post-hospitalization expenses, subject to the sum assured Health Insurance offers tax benefits under Section 80D. Insurance premium upto Rs 20,000 for senior citizens and Rs 15,000 for others is eligible for tax benefit. If the policyholder pays Rs 15,000 as premium on his own policy and Rs 20,000 for his parent, a senior citizen, he can claim tax benefit of Rs 35,000 (Rs 15,000+20,000). Maturity value is tax free for sum received under critical illness insurance policies policies

NPS
The NPS or the New Pension Scheme is regulated by the Pension Funds Regulatory and Development Authority - PFRDA. Any citizen of India over the 18 - 60 years age bracket can participate in it.

It is extremely cost effective since fund management charges are low. Investment by fund managers in three separate accounts having distinct asset profiles viz. Equity (E), Corporate bonds (C) and G Government securities (G). Investors can choose to manage their portfolio actively (active choice) or passively (auto choice).

Contributions made to the NPS are covered under Section 80CCD of the Income Tax Act. The aggregate limit of deduction under this section along with Sections 80C, 80CCC cannot exceed Rs 1.5 lakhs.

Tax-saving mutual funds (ELSS)
Investments in ELSS, qualify for tax benefits. Tax-saving mutual funds invest in stock markets. Investments are locked in for three years.

Investments towards tax-saving mutual funds are covered under Section 80C of the Income Tax Act up to a maximum of Rs 1.5 lakhs.