A comprehensive list of best income tax saving investment options available in India to reduce your taxes. Latest rates updated for FY 2022-23 that every taxpayer to follow, and our detailed analysis including applicability, ROI, risks, rewards.
Not all investments under 80C are the same from Risks, Rewards, Limitations, and return on investment (ROI) perspective, below shows the comparison for easy to choose.
Total Deduction allowed across all Investments: Rs. 1,50,000 + 50,000 + 10% of Salary
|Type of Investment &|
Reason for Recommendation
|Typical Return % Per Year||Risks||Maximum Deduction Allowed|
|ELSS (Equity Linked Saving Scheme)|
Reason : You can Save Tax and Grow Money over the time.
|12 - 18%*, This vary drastically based on type of Fund, Holding period, but one need to consider 3 year average.||Invest long period get more benefit and try to avoid dividends|
|NPS (National Pension Scheme)|
Reason : Get money at the time of retirement, 40% of the return is tax exempted.
Note : Tax benefits will be applicable only to the investments under Tier 1 NPS Accounts. Tier 2 NPS accounts are not eligible for tax benefits.
|9 – 12%||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 (Basic Salary + DA). It will be in addition to 80C|
|iii) Additional Employee's contribution to NPS (Section 80CCD-1B)||50,000|
|ULIPS (Unit Linked Saving Scheme)|
Reason : 5 Years lock-in-period gives you Savings and Tax-free Returns
|9-16% *||Early withdrawal may incur charges that may reduce return on investment.|
Reason : For higher education purpose you can withdraw 50% deposited
|7.60 %||Available for Girl child under 10 years of age.|
|VPF (Voluntary Provident Fund)|
Reason : Safe and Secure; Money automatically flows into the PF account.
|PPF (Public Provident Fund)|
Reason : Safe and Secure; Money automatically flows into the PF account.
|Senior Citizen Saving Scheme|
Reason : Post Office saving scheme; Maturity period is 5 years. After 5 years you can increase your period, interest will be added to your savings account
|8%||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.|
|NSCs (National Saving Certificate)|
Reason : Like FD of Money, but the earned interest is not taxable; On retirement, it will fetch you monthly pension as the NSC matures.
|7.0%||Investments cannot be withdrawn prematurely unless the case involves the death of the primary holders.|
Reason : 33% of Tax free at the time of withdraw
Reason : The interest rate on tax saving FD is decided by the banks. Senior citizens get a higher interest rate.
| 3.00 – 7.00 |
3.5 – 7.25 %*
(for Sr. Citizens)
|Tax on interest, The lock in period for the Tax Saving FD is 1-5 years.|
|Post Office Recurring Deposit (RD)|
Reason : The interest rate on tax saving RD is decided by the Post Master General in India.
|5.8 (for 5 years)||Tax on interest, The lock in period generally for 5 years.|
|Life Insurance Plan|
Reason : Lower the Taxes, Protects from Life Risks.
|5-6%||May earn 5 to 6% of savings and Life Insurance Cover. Fairly Safe Investment.|
|Total Deduction allowed across all Investments:||1,50,000 + 50,000 + 10% of Salary|
Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly.
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 2019-20 onwards
Use Health Insurance Deduction Calculator to know the maximum deduction
Also, learn more on Taxability of Employer-Provided Medical Expenses.
An individual can claim a deduction of up to Rs.10,000/- of interest received from Savings Account
Senior and Super senior citizens can claim a deduction of up to Rs. 50,000/- of interest received from Savings, and Fixed Deposit (FD). This deduction is new and applicable from assessment year 2019-20.
Note : Non-resident senior citizens cannot claim deduction u/s 80TTB. However they can claim deduction of Rs 10,000 u/s 80TTA
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.
House rent paid by Self-employed or Salary with no House Rent Allowance (HRA) is eligible to claim house rent deduction u/s 80GG.
You may refer more about Section 80GG @ Deduction in respect of Rent Paid (80GG)
Donation made for scientific research or rural development the whole amount given is allowed as deductionEligibility:
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.
If the loan is against a property on which there is rental income, there is no limit on the interest to be claimed as deduction against rental income
Example: Mr Krishna has purchased a property in 2021 against a Loan. He is getting rental income of Rs 3,60,000 per year. He is paying a Home Loan interest of 5,20,000 per year against the same property.
Mr Krishna can carry forward this loss upto 8 years and set off the same against his rental income in future
Note 1: Acquisition or construction should be completed within 5 years from the end of financial year in which the capital was borrowed
Note 2: Interest payable on a fresh loan taken to repay the original loan raised is eligible for deduction
Note 3: Interest accrued but not paid can also be claimed as deduction u/s 24. However interest on unpaid interest is not deductible
Section 80EEA gives additional exemption of Rs. 1,50,000/- on the payment of interest on Home Loan. This deduction is available if the loan is taken under affordable housing scheme. The deduction u/s 80EEA is available from AY 2020-21 and subsequent years. Section 80EEA is applicable for the loans taken from 01/04/2019 to 31/03/2023.
Note: For the Loans taken from FY 2022-23 , Interest paid is not eligible to be claimed under Section 80EEA. Interest paid on Loans taken before 01/04/2022 are eligible to be claimed under Section 80EEA
Section 80EEB gives tax benefit on purchase of an electric vehicle. Interest paid on loans taken for the purchase of electric vehicle is allowed as deduction upto Rs 1,50,000. The deduction u/s 80EEB is available from AY 2020-21 and subsequent years. Section 80EEB is applicable for the loans taken from 01/04/2019 to 31/03/2023
Note: For the Loans taken from FY 2022-23 , Interest paid is not eligible to be claimed under Section 80EEB. Interest paid on Loans taken before 01/04/2022 are eligible to be claimed under Section 80EEB
Important Note: Form 10-IA from a certified competent medical authority (mostly a government doctor) is needed to claim this benefit. In most cases, the IT department ask you to upload this document for verification. You should plan to have this document handy before claiming this benefit while filing your taxes in India. Applies to both benefits under sections 80DD, 80U
Section 80DD provides deduction in respect of maintenance including medical treatment of a dependent disabled. The amount of deduction is as follows
The amount of deduction available based on % of disability.
The disabilities that are considered by Income Tax Act for a tax deduction are
Two most frequently used terms to define the level of Disability.
Note: As per Budget 2022, the parents /guardian can claim deduction u/s 80DD if they take a Life Insurance policy on dependants even on the payment of Lumpsum amount or annuity during the lifetime of Parents/guardian attaining the age of 60 years
Earlier the deduction was allowed only if the lumpsum or annuity received by disabled people only after death of parents or guardian
Section 80DDB provides deduction in respect of medical expenditure towards specified disease or ailment on self or dependent is available as a deduction.The amount of Deduction available is as follows
For the purposes of section 80DDB, the following shall be the eligible diseases or ailments:
Royalty on patents up to Rs. 3,00,000 in the case of a resident individual who is a patentee and is in receipt of income by way of royalty in respect of a patent registered on or after 1-4-2003 (subject to certain conditions).
Under section 80QQB, deduction of up to a maximum Rs 3,00,000 is allowed to an individual resident in India in respect of income derived as author i.e., the deduction shall be the income derived as author or Rs 3,00,000, whichever is less.
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