Home > Help Center > Income Tax Saving InvestmentsLast Updated: Mar 01st 2020
Best Income Tax Saving Investment Options AY 2020-21
A comprehensive list income tax saving investment options in India for AY 2020-21 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, 80EEA, 80EEB
Tax Saving Investments under 80C:
| Type of Investment | Reason for Recommendation | Typical Return % Per Year | Risks | Maximum Deduction Allowed |
|---|---|---|---|---|
| ELSS (Equity Linked Saving Scheme) | You can not only save tax but also grow money. | 12 - 15%*, 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 | 1,50,000 |
| NPS (National Pension Scheme) | Get money at the time of retirement, 40% of the return is tax exempted. | 8% | 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) | 5 Years lock-in-period gives you Savings and Tax-free Returns | 9.20% | Early withdrawal may incur charges that may reduce return on investment. | 1,50,000 |
| Sukanya Samriddhi | For higher education purpose you can withdraw 50% deposited | 7.60% | 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. | 7.10% | 1,50,000 | |
| Senior Citizen Saving Scheme | 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 | 7.40% | 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. | 6.80% | Investments cannot be withdrawn prematurely unless the case involves the death of the primary holders. | 1,50,000 |
| Pension Plan | 33% of Tax free at the time of withdraw | 6.8% | High Charges | 1,50,000 |
| Bank FDs | The interest rate on tax saving FD is decided by the banks. Senior citizens get a higher interest rate. | 5.5-6.7% | Tax on interest, The lock in period for the Tax Saving FD is 5 years. | 1,50,000 |
| Insurance Plan | Lower the taxes | 5-6% | May earn 5 to 6% of savings only | 1,50,000 |
| Total Deduction Allowed across all Investments | 1,50,000 + 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 2019-20 onwards
- For normal citizen, health insurance limit is Rs.25,000 with preventive health check-up
- 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:- From 2018-19 financial year onwards, Savings Account Interest deduction allowed for senior citizens has increased from Rs.10,000 to Rs.50,000/- .
- 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 from 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:- Principal Repayment on educational loan cannot be claimed as tax deduction.
- 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:- No deduction shall be allowed in respect of any sum exceeding ten thousand rupees unless amount is paid by any mode other than cash.
- 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.
Interest on Home Loan (24b):
Interest payable on loan taken for the purpose of acquisition, construction, renewal, repairs or reconstruction can be claimed as deduction. The total interest that can be claimed as deduction u/s 24b is Rs. 2,00,000
Interest paid on Housing Loan on / after Apr 01st 2019 (Section 80EEA):
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.
Interest paid on Electric Vehicle Loan (Section 80EEB):
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.
Treatment of specified diseases and ailments (Section 80DDB):
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
- Resident Individual - Rs 40,000 or amount paid whichever is less
- Resident individual of age 60 years or more- Rs 1,00,000 or amount paid whichever is less
Deduction in respect of Maintenance including medical treatment of a dependent disabled (Section 80DD):
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.
- Disability (Less than 80%) – Rs 75,000
- Disability (80% or more than 80%) – Rs 1,25,000
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