A Study on Investment preferences in various Tax Saving
Instruments
R.SAI ROHITH ANUVRAT PARIMAL
School of management, School of management,
NIT WARANGAL NIT WARANGAL
ABSTRACT
Tax planning is an essential part of our financial planning.
Efficient tax planning enables us to reduce our tax liability
to the minimum. This is done by legitimately taking
advantage of all tax exemptions, deductions rebates and
allowances while ensuring that your investments are in line
with their long-term goals. The purpose of the study is to
find out the most suitable and popular tax saving
instrument used to save tax and also to examine the amount
saved by using that instrument. Over all findings reveals
that the most adopted tax saving instrument is Life
Insurance policy, which got the first rank in this study and
the second most adopted tax saving instrument is Provident
Fund.
Keywords
Tax, Tax saving Instruments, Tax Planning, Tax
Management, Tax Evasion and Tax Avoidance
TAX PLANNING: AN INTRODUCTION
In alternative words all arrangements by that the tax is
saved by ways in which and means that, that suits the legal
obligation and necessities and aren't colorable devices or
techniques to satisfy the letters of law however not the fairy
behind these, would represent tax coming up with. Tax
coming up with shouldn't be finished associate degree
intent to con the revenue, All transactions entered into by
associate degree assessee might be de jure correct,
nonetheless on the total these transactions could also be
devised to con the revenue. All such devices wherever
standing is followed in strict words however truly spirit
behind the statute is marred would be termed as colorable
devices and that they don't kind a part of the tax coming up
with. All transactions in respects of tax coming up with
should be in according with truth spirit of statute and will be
correct in kind and substance.
The The form and substance of a dealings is real check of
any tax-planning device. the shape of dealings, because it
seems superficially and therefore the real intention behind
such dealings might stay hid. Substance of a dealings refers
to lifting the veil of legal documents and ascertaining the
intention of parties behind the dealings.
ARVINTH.M NIKHIL JHA
School of management, School of management,
NIT WARANGAL NIT WARANGAL
Tax coming up with is that the arrangement of one’s
affairs in such a way that the tax planner might either cut
back the incident of tax totally or cut back it to most doable
extent as could also be permissible with within the
framework of the taxation land. It doesn't quantity to
evasion of tax. it's associate degree act of prudence and
ametropia on the a part of the payer United Nations agency
is entitle to scale back the burden of his liabilities to the
utmost doable extent below the prevailing law. Tax coming
up with ensures not solely accruals of tax deduction with
within the four corners of law, however it additionally
ensures that the tax obligations square measure properly
discharged to avoid penal provision.
A. Tax Evasion And Tax Avoidance
Tax Evasion: It refers to a scenario wherever an individual
try and cut back his liabilities by deliberately suppressing
the financial gain or by inflating the expenditure showing
the financial gain below the particular financial gain and
resorting to numerous styles of deliberate manipulations.
associate degree assessee guilty of nonpayment is
punishable below the relevant law. nonpayment might
involve stating associate degree untrue statement wittingly,
submitting dishonorable documents, suppression of facts,
not maintaining correct accounts of financial gain attained
(if needed below the law) omission of fabric facts in
assessments. associate degree assessee, United Nations
agency venally claims the profit below the statute by
creating false statements, would be guilty of nonpayment. .
Tax avoidance: the road of demarcation between tax
coming up with and minimisation is extremely skinny and
blurred. There might be part of mollified motive concerned
within the minimisation additionally. Any coming up with
that, through done strictly in step with legal necessities
defeats the essential intention of the general assembly
behind the statute might be termed as instance of
minimisation. it's typically done by adjusting the affair in
such a way the there's no infringement of taxation laws and
b taking full advantage of the loopholes there in therefore
on attract the smallest amount incidence of tax.
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 management. Tax coming up with with out the study of tax management is
B. Types of Tax Planning
The tax coming up with exercise ranges from fashioning a like knowing the medication with out knowing the way to administer it .
model for specific dealing furthermore as for systematic
company coming up with. These are; 2.
1. Short and long vary tax planning: Short vary coming up
with refers to year-to-year attending to bring home the bacon
some specific or restricted objective. as an example, a personal
assessee whose financial gain is wish to register uncommon
growth in an exceedingly specific year as compared to the
preceding year, might decide to buy the PPF/NSC’s with
within the prescribed limits so as to get pleasure from
substantive tax relief. By investment in such some way, he's
not creating permanent commitment however is well saving
within the tax
2. Long range planning on the opposite hand involves getting
into in to activates, which can not pay off forthwith, as an
example, once Associate in Nursing assessee transfers his
equity shares to his minor son he is aware of that the financial
gain from the shares are going to be clubbed together with his
own financial gain, however symptom would additionally stop
once minor attains majority.
Permissive tax planning: Permissive tax coming up with is tax
coming up with beneath the specific provisions of tax laws.
Tax laws of our country provide several exemptions and
incentives.
Purposive Tax planning: Purposive tax coming up with relies
on the measures, that circumvent the law. The permissive tax
coming up with has the specific sanction of the statute whereas
the purposive tax coming up with doesn't carry such sanctions,
as an example, beneath section sixty to sixty five of the
tax.1961 the financial gain of the opposite persons is clubbed
within the financial gain of the assessee. If the assessee is in an
exceedingly position to set up in such some way that these
provisions don't get attracted, such a concept would add favor
of the tax money dealer as a result of it'd increase his
disposable resources. Such a tax set up may well be termed as
“Purposive Tax Planning”.
C. Tax management
Tax management is an inside a part of the tax coming up with.
It takes necessary precautions to befits the legal formalities to
avail the tax exemption/ deductions, rebates or relief as area
unit contempt’s within the theme of tax coming up with. Tax
management plays a significant role in calming allowance,
deductions and tax exemptions by compliant with the
specified conditions. as an example, wherever Associate in
Nursing assessee follows managed economy of accounting,
the claim of expenses ought to be created, subject to the
provisions of section 43B, on increase bases, if the assessee
fails to form such a claim, such expenses cannot be subtracted
in consequent years. Similarly, the desired deductions beneath
section 80IA, section 80JJA, etc., can't be allowed by the
assessing officer suo motu. Tax management additionally
protects Associate in Nursing assessee against penalty and
prosecution by discharging tax obligations in time. Thus, the
study of tax coming up with is incomplete while not tax
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THE POPULAR INVESTMENT
OPTIONS
PPF (with post offices/banks), statutory provident
fund (deducted and paid by the employees).
Life insurance premium (with the LIC or other
private insurers).
Unit-linked insurance (UTI & mutual funds).
Equity-linked saving schemes.
National Saving Certificates.
Infrastructure bonds.
Home loans.
3. TAX SAVING INSTRUMENTS
Deduction beneath section 80C is allowed solely to
individual or HUF, up to a most limit of one,00,000 Rs. and
therefore the deduction is allowed only if the quantity has
truly been paid by the assesseee. Following quantity paid or
deposited area unit allowed as deduction u/s 80C:
Contribution / subscription to PPF, NSC, NSS,
ULIP, ELSS
Fixed Deposit with any schedule bank for at
least 5 years
Any sum deposited as five years’ time deposit in
an account under the Post Office Time Deposit
A. Equity Linked Saving Schemes
ELSS is Associate in Nursing instrument sold by mutual
funds for the particular purpose of sanctioning taxpayers to
avoid wasting their taxes. The takings from ELSS area unit
largely endowed within the securities market in order that
the investors get the good thing about appreciation
available costs, thereby creating the securities market work
for investors. The deduction for ELSS is accessible beneath
section 80C of the tax Act 1961.
B. Life and Medical Insurance Plans
Life Insurance Policies have long been the foremost
well-liked tax saving instruments among taxpayers.
Insurance policies provide twin advantage for tax
deductions on premium paid and insurance protect the
underwriter and his family within the event of a financially
weakening event like accident, death, etc. The premium
paid on life assurance policies qualify for tax deductions
beneath section 80C, subject to a most of Rs.1 100000 once
a year. Most firms giving life assurance additionally
provide medical insurance policies furthermore as pension
plans which supply deduction beneath section 80D.
Deduction is allowed to Associate in Nursing
individual/HUF for payment towards Medical payment or
to any contribution made to the central Government health
Scheme by any mode other than cash.
Maximum 15,000 (For insurance of individual,
spouse, dependent children) or 20,000 in case of senior
citizen, and
Maximum 15,000 (For insurance of parents) or
20,000 if parents are senior citizen.
C. Housing Loan
Repayment of principal quantity of loan taken for
purchase/construction of residential house property from
central/state Government, Bank, LIC, National Housing
Bank or from leader (where leader is statutory corporation,
public company, university, college, or bureau or
co-operative society) below section 80C.
Public Provident Fund:
The contributions created to the workers provident fund
(EPF) and Public Provident Fund (PPF) also are eligible for
tax deductions below section 80C.While the contribution
paid to EPF and PPF by the workers ar subject to the ceiling
of Rs.1 large integer below section 80C..
D. National Savings Certificate:
It It are often bought at any post offices within the country.
whereas there's no higher limit for investment, the write-off
on NSC is out there subject to overall limit of Rs.1 large
integer below section 80C.
E. Term Deposits and Bonds:
Many of the business banks have mounted deposit schemes,
that qualify for tax deductions. These deposits have a
lock-in-period of 5 years. Investments in these deposits ar
subject to the ceiling limit of Rs.1 large integer each year
below section 80C. There ar alternative such expenses like
registration charges and taxation paid on house property,
tuition fees for children’s education, among others, that
qualify for deductions below section 80C.
4. RESEARCH METHODOLOGY
Research methodology could be a thanks to consistently
solve the matter. The study of the analysis style is
descriptive in nature as a result of it throws light-weight on
relationship between people and financial gain level on tax
saving quantity. analysis methodology for this study is as
follows:
A. Objectives Of The Study
The purpose of the study is to find out the most suitable tax
saving instrument used to save tax and also to examine the
amount saved by using that instrument.
B. Sample Design
The present study is predicated on
convenience-cum-stratified sampling. 3 heads of
occupation are taken as a sample and 2 sub-occupations are
known from heads shown in table N0. 1
C. Sample Unit
The scope of the tax includes the following areas,
(a). Business class
(b). Service class
(c). Others, like commission agents
The persons includes in this study are of different age
groups and various income groups. The area of the study
covers Andhra-pradesh & telangana and Maharashtra, but
for the purpose of collecting primary information form
respondents the study has been limited to three heads of
income tax. From 2 heads, 2 sub occupations have been
selected. While selecting three heads enough care has been
taken to see that this sample represents the whole of
universe.

Table 1- Sample Unit

Heads Occupation Sample

Salary Teachers 15
Railway Employees 15

Business & Shopkeepers 10

Profession
Advocates 10
Others Commission Agents 20
Total 70
Source – based on primary data

On the basis of above-mentioned five occupations selected railway employees, 10 shopkeepers, 10 Advocates and 20
from three main heads. The total sample size of respondents commission Agents.
is 70, which constitutes 15 teachers, 15

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 D. Analysis of the study
General information:

No.of responde

Figure 1. Gender

In the given figure X-coordinate axis represent Gender of Fifty three male & seventeen female respondents. The
respondents whereas Y-coordinate axis represents the proportion of male & female respondents is 75.8 % &
entire range of respondents. The total numbers of 24.2 % respectively.
respondents are 70 in which there are
no.of responde

Andhra pradesh & Telangana Maharashtra

Figure 2. Geographical distribution

In the given figure X-coordinate axis represent the

Geographical distribution of study respondents while
Y-coordinate axis represents the total number of
respondents.
No.of responde

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employees Agents

Figure 3. Occupation

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 In the given table X-coordinate axis represent the
occupations of the respondents while Y-coordinate axis
represents the total number. The entire range of respondents
are further classified in to six classes, which includes 15
teachers (21.4%)
Figure 4. Age Group
The above graph we have the comparison of the different
ages of the people who responded to the survey we
conducted. The x-axis represents the age of various
correspondents and the Y-axis represents the number of
respondents. As we can see from the above graph, 17
people fall in the age group 20-30 years which forms 24.2%
, 21 people fall in the age group of 30-40 about 30% , 11
people fall in the age group of 40-50 which forms 15.71%,
Income group
30
30
25
20
no.of
15
respondent
10
income
Figure 5. Income Group
In The above graph we have the details of the income group in
which people who responded to our survey fall into. The
Y-axis represents the number of respondents and the X-axis
represents the income group of the individuals 30 respondents
fall in the income group of less than 2 lakhs and
(14.2%), 10 Advocates (14.2%), 20 Commission agents
(28.4%), 15 railway employees (21.4%) & 10 shopkeepers
18 people fall in the age group of 50-60 about 25.7% , and
finally 2 people fall in the age group of 60-70 people about
4.2%
Income Group
Data was collected from varied professionals, that belongs
with totally different financial gain cluster. Following
figure shows financial gain wise description of
respondents-
30
<2 lakhs
2-5 lakhs
5-10 lakhs
<10 lakhs
2-5 lakhs and both of them form about 42.8 % of the responses
individually this in total covers about 85.6% responses in total. 7 people
fall in 5-10 lakhs income group which is about 10% of total responses and
3 people fall in less than 10 lakhs income group which forms about 4.28
% of the total responses.
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 Investment in Tax Saving Instruments
25
20
no. of responde
15
10
Figure 6. Amount invest in Tax saving Investment
Figure 6 The above graph is the data collected regarding the
tax savings amount of the people who participated in our
survey. 23 people have invested less than Rs 10000 which
form about 32.8% , 18 people have invested between Rs
10000-30000 which is about 25.7 % , 3 people have
invested between Rs 30000-50000 which is about 4.2 %, 6
people have invested between 50000 to 70000 which is
about 8.57% , 20 people have invested between
70000-90000 which form about 28.57%
no.of responde
Figure 7. Long term Investment In TSI
6
23
20
18
<10,000
Tax saving amount in Rs.
Long run Investment In tax Saving Instrument
is The above graph shows the details of long term
investments, X-axis represents the investments in the long
term Tax savings instruments and Y-axis represents the
total number of respondents.44 respondents which are
about 62.8% make sure that their investment in tax savings
are as per the long term financial goals, 8 respondents say
no which form about 11.4% and 18 respondents are those
who don’t know about their stuff which form about
25.8%
 Preferred Tax Saving Instruments
Table 2. Preferred Tax saving Instruments

Source- based on primary data

According to obtained responses, ranking is given to
different tax saving instruments. The people those
responded preferred life insurance as the efficient tax
saving method and ranked as first. Provident fund is the
second efficient ranked tax saving method while people
ranked Fixed Deposits as third. Home Loan and Education
Loan are the fourth efficient.
And preferred tax saving methods. National Saving
Certificates ranked as fifth. People preferred Unit Linked
Plans as the sixth and Health Insurance as seventh.Equity
Linked Saving Scheme and Infra Bonds are ranked as
eighth and ninth respectively.

Cross tabulation analysis between Age group/ Income group and Tax Saving Instruments

Table 3-Analysis of tax saving amount with various age groups

Tax
Saving <10 10-30 30-50 50-70 70-90
amount (in
Thousands)
Age
(In years)
20-30 11* 4 1 0 1

30-40 4 7* 0 4 6

40-50 3 3 1 0 4*

50-60 3 4 1 2 8*

60-70 2* 0 0 0 1

Source-based on primary data

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 * Mode
The rows in table 3 represent age groups while the columns
represent tax saving amount. There are 11 responses in the
20 to 30 age group, who saves less then Rs. 10,000 and so
on. There are 4 responses in the 30 to 40 age group, who
saves between Rs. 10,000 to 30,000
and so on. There are 3 responses in the 40 to 50 age group,
who saves between Rs. 30,000 to 50,000 and so on. There
are 3 responses in the 50 to 60 age group, who saves
between Rs. 50,000 to 70,000 and so on. There are 2
responses in the 60 to 70 age group, who saves between Rs.
70,000 to 90,000 and so on..

Table 4- Analysis of tax saving amount with various Income groups

Tax
Saving <10 10-30 30-50 50-70 70-90
amount
(in
thousands)
Income
(in
lakhs)

<2 18* 11 0 0 1

2-5 5 7 2 5 11*

5-10 0 0 1 1 5*

> 10 0 0 0 0 3*

5. FINDING AND SUGGESTIONS

(a). On On the basis of this analysis, the responses rank income like in between Rs. 2 - 5 lakhs, 5 - 10 lakhs and over
from various tax saving methods according to their priority 10 lakhs, the tax saving quantity is between Rs. 70,000 to
of saving tax. The most accepted tax saving instrument is 90,000. which implies that higher the financial gain, higher
Life Insurance policy, which got the first rank in this study. the savings.
The second most adopted tax saving instrument is
Provident Fund. Further, the third choice is Tax Saving
Fixed Deposits. Next is Home/Education Loans, National
Saving certificates, Unit Linked Insurance Plans, Health
Insurance Plans and Equity Linked Saving Schemes
respectively. The methods, which is least adopted, as tax
saving methods is Infrastructure Bonds, which got the ninth
rank in this study
(b). In an study of tax saving amount with various age
groups, it is found that, between the age group of 20 to 30
and 60 to 70, the tax saving amount is less then Rs.
10,000, which shows that saving is very low in young
age and old age. Whereas, between the age group of
30 to 40, the tax saving amount increases between Rs.
10,000 to 30,000. Further, the tax saving amount is
between Rs. 70,000 to 90,000 of the age groups
between 40 to50 and 50 to 60, which shows the
highest income saved of this study.
(c). On On an analysis of tax saving Figure : 8. Investment response of Teachers
amount with various income groups, it is
found that with the income of less then Rs. 2
lakhs, the tax saving amount is less then Rs.
10,000. Further, with the rise in financial

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(d) The study concludes that the teachers of higher education
are well aware of the various deductions, reliefs, and rebates
available as per the Indian income tax act. They prefer those
options of investment which are having low risk, high returns,
and full tax benefits. The study found that respondents are in
the opinion that the taxation system is difficult and they are
taking the help of the experts to file their income tax return.
The government should try to simplify the tax system so that
anyone can easily understand and file the return by
themselves. The study found teachers of higher education
levels are in the opinion that the tax rate is too high. also
shows that there is a need to reduce the tax burden on the
salaried employees as tax paid by salaried employees was
much more as compared to the individual business tax payers
for the assessment year 2016-17. It is also found people are
not investing in NPS though there is an option to save extra
tax by investing up to Rs. 50,000. That is due to the lack of
awareness of NPS. The medical deduction is also
underutilized. So, the study recommends to invest in NPS
and increase the amount of expenditure on health insurance
to reduce the tax liability of the teachers.

6. BIBLIOGRAPHY

[1.] V. Taxman’s Student guide for taxation

by Shinghania
[2.] Assessment of Individual Income tax,
Tax planning and saving in India
(IJCEM) by Kaushik
[3.] Investment instrument : Insurance as a tax saving and
investmentby Barot.p
[4.] Tax savings scheme and tax saving instruments of
income tax in india (IJSRD) by Lakshmi k.s
[5.] www.Policybazar.com
[6.] Income tax India. Retrived from
www.incometaxindia.gov.in
[7.] The psychology of saving. Cheltenham: Edward
Elgar Publishing Limited by K.E.warner
[9.] Report of the Advisory Group on Tax Policy and
Tax Administration for the Eleventh Plan. Planning
Commission
[8.] “Direct Taxes, Income Tax, Wealth Tax and Tax
planning by Lal.b and Vashisth.N
[9.] “Systematic approach to Income Tax and Central
Sales Tax by Dr. Ahuja Girish and Dr. Gupta
[10.] Rational Ways of Increasing Tax Revenues in
India by K.kavita rao, Raja chellaiah
[11.] Towards sustainable Growth- Essays in Fiscal and
Financial Sector Reforms In India by Raja.challaiah
[12.] “Neutrality in the Taxation of Savings: An
Extended Role for PEPs by Captain tax group (1989).
[13.] Taxing Household Saving: What Role for the New
Individual Savings Account? By Andrew.j.Banks

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