With the new hike in salary and the yearly bonus, plan tax saving before the Indian festivities blow your pockets

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Tax saving instruments and avenue especially for salaried individuals

We are almost halfway through this financial year 2016-17, however, many of us has got the revised paycheques with increment and bonus only in July/ August. The accounts team have given reminders for tax declaration forms. Let us quickly look at the lists of investment options where we can save some tax as well as utilise the fund in building wealth and help good cause.

Tax saving investments can be divided in 4 parts – 1. #Investments  2. #Insurance 3. Expenses 4. #Donations and social causes. In this post I intend to only identify the areas of investments. The next post will elaborate on the best ways to manage tax savings.

Tax savings instruments are introduced by government to promote savings practices, participating in the overall economy growth, encourage donation and charities for good causes and also rewarding investing in environmental-social sectors. It is not to be used as tax evasion tool in any form.

In the Income Tax act of India act, section 80C to 80U covers the tax exemption areas.

Tax saving eligible investments options

Categories	Details	Lock-in period	Minimum and maximum investment per year	Other benefits	Tax benefits
EPF	The amount is deducted from the salary by the employer. Employer also for makes equal contribution to the fund. This is a compulsory contribution.	As per new laws, one need to mandatorily keep the fund until 58 years of age	Minimum if 12% of Basic and DA. Benefit upto Rs. 1,50,000 investment per year	Employee can avail loan benefits and partial withdrawal allowed on resigning job. This account is transferable on job change	Maturity amount is complete tax free above 5 years Find more
VPF	Voluntary Provident Fund, can be opted by an employee, carries same interest rate as EPF		The lower limit not specified, however, upper limit is at 1,50,000	Loan facility/ partial withdrawal facility available	Tax free on maturity
PPF	Long term saving scheme by banks, return over 8% annually	15 years	Minimum Rs. 500 a year and maximum Rs. 1,50,000	Enjoys triple tax benefit. Partial withdrawal allowed 6th year onwards	Enjoys triple tax exemption benefit.
NSC	Eligible for deduction in the year they are purchased.	5 years, 10 years		The interest earned is non-taxable except last year	The interest earned in the last year is taxable.
Sukanya samridhi Yojana	Special saving scheme promoting development of girl child, enjoys higher interst rate than PPF	Until daughter turns 18 years	Minimum investment of Rs. 1000 year, upto 1,50,000	Enjoys triple tax exemption benefit. No tax on interest earned	Enjoys triple tax exemption benefit.
Tax Saving Fixed deposits	Eligible for deduction n the year purchased, banks and post office have this facility	5 years	Maximum Rs. 1,50,000		Interest earned is taxable on maturity
Senior citizen savings scheme	Deposit schemes in banks for senior citizens			Also enjoys higher interest rate
Insurance/ annuity plans (80CCC)	Premium paid for deffered annuity plans, life insurance schemes	NA	The upper limit is at 1,50,000	Enjoys triple tax exemption benefit
ELSS	Mutual Fund scheme, with 3 year lock-in period	3 year lock –in period	Minimum 5,000 Maximum investment 1,50,000 per year	Enjoys triple tax exemption benefit	Rs. 1,50,000
Contribution towards pension account 80CCD(1)	Maximum deduction allowed is 10% of salary, and 10% of gross income for self-employed,		limit – Rs. 1,50,000		Upto Rs. 1,50,000
Self contribution - Pension Fund/ Atal pension Yojana- 80CCD(1B)	Towards NPS/ Atal Pension Yojana		Deduction is allowed on contribution up to Rs 50,000. (This is additional to the available 1,50,000 limit)		Rs. 50,000
Employer’s contribution -Section 80CCD(2)	Deduction is allowed for employer's contribution to employee’s pension account up to 10% of the salary of the employee.		There is no monetary ceiling on this deduction.		Upto 10% of employee's salary
Equity Savings scheme 80CCG	A 50% deduction on tax on the investment. Person with salary less than 12 lakh		Rs. 50,000 is the upper limit		50% deduction on the investment year

Other earnings eligible for tax saving

Categories	Details	Benefit
Interest earned from savings account	Tax savings claimed can be made on interest earned on savings account	Exemption upto Rs. 10,000 per year

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Expenses eligible for tax exemptions (Insurance and expenses) 

Categories	Details	Benefit
Life Insurance premium	Premium paid is eligible for tax benefit (for self, spouse, child)	valid on insurance policies if the premium is less than 10% of sum assured
Premium paid for medical insurance	Benefit upto 15,000 for self, spouse and children. Can be upto 20,000 if self/spouse is above 60 years	Additional deduction for 15,000 for parents and 20,000 if parents are above 60 years
Medical expenditure on handicap relative (80DD)	Expense on treatment, maintenance, rehabilitation and care	For 40-80% disability, fixed deduction of 50,000 Severe disability over 80%  - 1,00,000
Medical expense of self/ dependant (80DDB)	For the diseases specified in Rule 11DD. A certificate in form 10 I is to be furnished by the taxpayer from any Registered Doctor.	The maximum amount of deduction allowed from gross total income on condition that no medical reimbursement is received from any insurance company or employer for this amount
Person suffering from physical disability (80U)	Individual who suffers from a physical disability (including blindness) or mental retardation	Deduction of Rs. 50,000/-
Tuition fee	For children of the tax payer, school, college, university or any other institute within India	Capped at Rs. 1,50,000
Home loan	Principal repayment of home loan	Capped at Rs. 1,50,000
Home loan interest payment (80EE)	First time home buyers can avail this facility for self-occupied property	The value of the house should be less than 50 lakhs and loan amount is less than 35 lakh. This is over and above the 2,00,000 limit
Stamp duty and registration for home buyers	Allowed under 80 C	Capped at Rs. 1,50,000
Deduction on house rent (80 GG)	This is available in case no HRA is attached in the salary structure and  not allotted accommodation by the employer	Maximum of Rs. 60,000 per annum can be claimed
Education loan for higher studies (80E)	Interest on the loan is eligible for tax benefit, can be upto 8 years or the interest payment completed whichever is earlier	Capped at Rs. 1,50,000

Social causes and donations

Categories	Details	Benefit
Donation towards social causes (80G)	Deduction up to either 100% or 50% with or without restriction as provided in Sec. 80G. click here for details	Donation over 10,000 cannot be by cash
Deductions on Contribution by Individuals to Political Parties (80GGC)	Political party registered under section 29A of the Representation of the People Act.	Cash contribution not allowed
(80RRB)	Deductions on Income by way of Royalty of a Patent	up to Rs. 3 lakhs

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information used/referred from bankbazaar, cleartax, taxguru etc.