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Best Income Tax Saving Investment Options AY2019-20

A comprehensive list income tax saving investment options in India for AY 2019-20 that every Tax Payer to follow, and our detailed analysis including rate of return, risks, rewards. Covering under Section 80C, 80CCC, 80CCD(1), 80CCD(1b), 80CCD(2), 80D, 80DD, 80U, 80DDB, 80E, 80G, 80GGA, 80GGB, 80GGC, 80GG.

Best Income Tax Saving Investment Options

Tax Saving Investments under 80C:

Type of InvestmentReason for RecommendationTypical Return % Per YearRisksMaximum Deduction Allowed
ELSS (Equity Linked Saving Scheme)You can not only save tax but also grow money.18.50%Invest long period get more benefit and try to avoid dividends1,50,000
NPS (National Pension Scheme)Get money at the time of retirement, 40% of the return is tax exempted.12.30%Only 20% exempted when you withdraw before 60 years of age.
i) Employee's contribution to NPS (Section 80CCD-1)1,50,000
ii) Employer's contribution to NPS (Section 80CCD-2)10% of salary
iii) Additional Employee's contribution to NPS (Section 80CCD-1B)50,000
ULIPS (Unit Linked Saving Scheme)5 Years lock-in-period gives you Savings and Tax-free Returns10.70%Early withdrawal may incur charges that may reduce return on investment.1,50,000
Sukanya SamriddhiFor higher education purpose you can withdraw 50% deposited8.50%Available for Girl child under 10 years of age.1,50,000
VPF (Voluntary Providend Fund) and
PPF (Public Providend Fund)
Safe and Secure; Money automatically flows into the PF account.8.50%1,50,000
Senior Citizen Saving SchemePost Office saving scheme; Maturity period is 5 years. After 5 years you can increase your period, interest will be added to your savings account8.30%If account is closed before 2 years, you have to pay 1.5% of balance in to the account, after 2 years 1% of the balance.1,50,000
NSCs (National Saving Certificate)Like FD of Money, but the earned interest is not taxable; On retirement, it will fetch you monthly pension as the NSC matures.8.20%Investments cannot be withdrawn prematurely unless the case involves the death of the primary holders.1,50,000
Pension Plan33% of Tax free at the time of withdraw8-10%High Charges1,50,000
Bank FDsThe interest rate on tax saving FD is decided by the banks. Senior citizens get a higher interest rate.7.50%-8.50%Tax on interest, The lock in period for the Tax Saving FD is 5 years.1,50,000
Insurance PlanLower the taxes5.50%May earn 5 to 6% of savings only1,50,000
Total Deduction Allowed across all Investments1,50,000 + 50,000 + 10% of Salary

Health Insurance (80D):

Health insurance cover for self and family premium paid not only buys the health cover but also help in saving your taxes.

Health Insurance Limits

For Assessment Year 2018-19, 2017-18

  1. For normal citizen, health insurance limit is Rs.25,000 with preventive health check-up
  2. For senior and super senior citizens, health insurance limit is Rs.30,000 with preventive health check-up
  3. Medical expenditure incurred on the health of tax payer himself or family or parents family to super senior citizen aggregate Rs.30,000 can claim The above limits applicable to tax payer family and parents family individually, that means tax payer can get maximum benefit Rs.60,000

For the assessment year 2019-20, the limit for senior and super senior citizen is increased to Rs.50,000 so tax payer get maximum benefit of Rs.1,00,000. Medical expenditure deduction is applicable for both senior and super senior citizen

Use Health Insurance Deduction Calculator to know the maximum deduction

Savings Interest (80TTA):

An individual can claim a deduction of up to Rs.10,000/- of interest received from Savings Account

Note:
  1. From 2018-19 financial year onwards, Savings Account Interest deduction allowed for senior citizens has increased from Rs.10,000 to Rs.50,000/- .
  2. No deduction is allowed for the interest earned on fixed deposit (FD).

Savings Interest (80TTB):

Senior and Super senior citizens can claim a deduction of upto Rs. 50,000/- of interest received from Savings, and Fixed Deposit (FD). This deduction is new and applicable form assessment year 2019-20.

Note: The tax payer avails the benefit of 80TTB can’t claim the benefit of 80TTA, the total limit of 80TTA and 80TTB is Rs.50,000

Interest on Education Loan (80E):

There is no limit on the amount of interest on education loan, you can claim as deduction for interest that you pay towards your Education Loan. This loan should have been taken for higher education for you, your spouse or your children or for a student for whom you are a legal guardian.

Note:
  1. Principal Repayment on educational loan cannot be claimed as tax deduction.
  2. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.

Donations (80G):

Donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income.

The amount of donation which can be claimed as a deduction under section 80G is determined as per certain rules. You can claim either 100% or 50% of the amount donated as a deduction subject to 'With' or 'Without' the upper limit.

Donations (80GGA):

Donation made for scientific research or rural development the whole amount given is allowed as deduction

Eligibility:
  1. No deduction shall be allowed in respect of any sum exceeding ten thousand rupees unless amount is paid by any mode other than cash.
  2. No deduction shall be allowed in case of an assesse whose gross total income includes income which is chargeable under the head 'Profits and gains of business or profession'.

Donations (80GGC):

Donation to a recognised political party or an electoral trust can claim full tax deduction.

Assesse needs to pay donation through cheque, demand draft or internet banking. Cash payments are not eligible for rebate.


Out of all the options, investing in Mutual Funds under ELSS (Equity Linked Saving Scheme) is the quick and easiest way to Save on Taxes.
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