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Investments help you save not just tax but be prepared for the future as well. Read on to find investment options that can help you save tax in FY 2021-22.

Investment options that can help you save tax

It is investment declaration time. Are you utilising the full quota of tax deductions available under the Income Tax Act? If you have opted for the Old Tax Regime, you have a host of deductions that you can claim to maximise your income and save tax. Find out if you are making efficient use of all the available sections by checking below.

Tax-saving investment options under Section 80C

Under Section 80C of the Income Tax Act, you can claim tax deductions up to Rs 1.5 lakh in a financial year. The investment options are as follows: 

Life insurance plans and Unit-Linked Insurance Plans (ULIPs):

  • Tenure: As chosen from 5 to 35 years but for ULIPs, the minimum lock-in tenure is 5 years.
  • Taxation: Maturity benefit is tax-free under Section 10(10)D for plans more than 5 years provided the sum assured is at least 10 times that of the premium amount.

Equity-Linked Savings Schemes (ELSS):

  • Tenure: Open-ended fund with a minimum lock-in period of 3 years.
  • Taxation: Maturity is taxed at 10% for gains exceeding Rs 1 lakh. 

Public Provident Fund (PPF):

  • Tenure: Total tenure of 15 years, which can be extended for a block of 5 years.
  • Taxation: The maturity amount is tax-free; it qualifies under EEE.

Employee Provident Fund (EPF):
EPF is where the same amount of money is also contributed by the employer.

  • Tenure: Till retirement.
  • Taxation: Interest is tax-free for employees contributing less than Rs 2.5 lakh per annum (else, it is taxable).

Tax-saving bank Fixed Deposits (FDs):

  • Tenure: 5 to 10 years.
  • Taxation: TDS @10% would be deducted from the interest earned if it is more than Rs 10,000 per annum (unless form 15G is submitted).

National Savings Certificate (NSC):

  • Tenure: 5 years
  • Taxation: Interest is taxed as per slab.

Senior Citizens Savings Scheme (SCSS):

  • Tenure: 5 years, which can be extended for a further 3 years.
  • Taxation: TDS @10% would be deducted from the interest payout.

Sukanya Samriddhi Yojana (SSY) for a girl child:

  • Tenure: Will operate for 21 years from the date of opening or till the wedding of the girl after she turns 18. 
  • Taxation: The maturity amount is tax-free and qualifies as EEE.

National Pension Scheme (NPS) under Section 80CCD(1): 

  • Tenure: Lifelong.
  • Taxation: Tax benefit is given to Tier I accounts but not to Tier II accounts. An annuity is taxable in the hands of the annuitant.
    There is an additional tax benefit of Rs 50,000 for the premium paid towards NPS under Section 80CCD(1B) over and above the Rs 1.5 lakh 80C limit.

Also Read: How To Save Income Tax By Investing In Fixed Deposits?

More tax-saving investment options

Section 80D:
Here is a list of deductions under Section 80D for health insurance premiums:

Premium paid

*If HUF members are over the age of 60, the deduction will be Rs 50,000. If they are below 60, the deduction stands at Rs 25,000.

Also Read: Saving Is Great! But It's Time Women Need To Start Investing

  • You can claim up to Rs 75,000 under Section 80D for the payments made for the treatment or care of a disabled dependent under an approved scheme. The limit increases to Rs 1.25 lakh for a severely disabled dependent.
  • Section 80DD(1B) allows deductions of Rs 40,000 for payments made towards the treatment of a specified disease for yourself or a dependent. The amount is increased to Rs 1 lakh for senior citizens.
  • Under Section 24, the home loan interest is tax-deductible up to Rs 2 lakh if you reside in the property or if it is vacant. For rented out properties, the entire home loan interest amount is tax-deductible. 
  • With Section 80EE, you get an additional deduction of Rs 50,000 on home loan interest exceeding the Section 24 limit. First-time buyers can claim a tax rebate of up to Rs 1.5 lakh on the purchase of a new house under Section 80EEA.
  • Under Section 80G, you can claim tax deductions for charitable donations.
  • Section 80E allows you to claim deduction on the interest paid on education loans for yourself or a dependent.
  • Under Section 80EEB, you can claim a tax deduction on the interest paid on an electric vehicle loan availed between 1 April 2019 and 31 March 2023.
  • Those who do not get House Rent Allowance (HRA) as part of their salary can claim HRA under Section 80GG. The amount claimed should be the least of the following:
    Rs 5000 per month
    Rent paid reduced by 10% of the total income before deduction
    25% of the total income before deduction

Also Read: Smart Ways Couples Can Save On Income Tax

Last words

A penny saved is a penny gained, and so is the case with tax-saving investments. However, please note that these deductions are applicable only if you choose the Old Tax Regime and not the NewTax Regime.

Section 80C is associated with tax savings. But there are many more deductions available. Before you submit your declaration, make sure you have covered all bases so you can efficiently save tax for 2021-22.