10/4/21, 11:31 AM All About Income Tax Saving Schemes and Sections

ax Saving Schemes
You can minimise your tax burden by investing in the tax saving schemes offered by government and private
organisations. By investing in these schemes you will become eligible to avail tax deductions and exemptions
under various Sections of the ITA.

In India, the quantum of Income Taxes can be somewhat reduced by investing smartly in tax saving schemes.
There are multiple opportunities to reduce an individual’s tax burden by using the available schemes
appropriately. There are various sections of the Income Tax Act, 1961 which deal with tax deductions and
exemptions such as Section 80C, 80D, 80CCF and others. Many government and private sector organizations
provide a wide range of tax saving options for Indian residents.

Tax Saving Schemes

Income Tax Saving Schemes

Income tax savings schemes are offered as per the relevant sections of the Income Tax Act, 1961. The chief
among these is the Section 80C which offers potential tax savings options of up to Rs.1.5 lakhs yearly. There are
other sections also that provide benefits to individuals. Major income tax saving instruments include:

Public Provident Fund: Also called PPF, you can make a maximum contribution of Rs.1.5 lakhs per year
in this tax saving scheme. PPF cannot be withdrawn before 15 years without penalty.
Unit Linked Insurance Plans: Also called ULIPs, these tax saving schemes allow for a maximum
exemption of Rs.1 lakh per year u/s 80C. Apart from investment exemption, the maturity earnings are also
tax exempt.
Tax Saving fixed deposit: Tax saving fixed deposits are available for a fixed tenure of 5 years and a
maximum of Rs.1 lakh can be invested to avail tax benefits per year u/s 80C.
Employee Provident Fund: Also called EPF, this is another investment scheme that offers tax benefits
u/s 80C up to Rs.1 lakh per year.
National Saving Certificate: Also called NSC, this instrument can be used to earn tax saving interest up
to Rs.1 lakh per year u/s 80C.
Infrastructure Bonds: This investment avenue allows for a maximum exemption of Rs.20,000 per
annum u/s 80C. Interests are chargeable, with investors being allowed to claim tax exemptions on these
for Rs.15,000 u/s 80L.
Tax Saving Mutual Funds: These funds allow for exemptions up to Rs.1 lakh per annum u/s 80C. ELSS
are popular instruments for tax savings through mutual funds.

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10/4/21, 11:31 AM All About Income Tax Saving Schemes and Sections

What are Tax Saving Mutual Funds?

Tax saving mutual funds are also known as Equity Linked Savings Scheme or ELSS. These funds offer the
opportunity for capital appreciation through investments in equities while saving on taxes along the way. Also,
long term capital gains from these schemes are tax free, while dividend options for such funds will enable capital
gains even during the lock-in period. The typical lock-in period varies between 3-5 years and the benefits are
provided u/s 80C, which entitles investors to tax benefits up to Rs.1 lakh each year. Major fund houses offering
ELSS funds are:

HDFC MF
IDBI MF
Birla Sun Life MF
ICICI Prudential MF
SBI MF

Post Office Tax Saving Schemes

Post office tax saving schemes also fall under the ambit of Section 80C. You can claim up to Rs.1 lakh in tax
benefits every year through the various post office investment options. Some of the major tax saving schemes
offered by the post office are:

Time deposit account

Recurring deposit account for 5 years
15 years Public Provident Fund account
Senior Citizen Savings Scheme
National Savings Certificate (VIII issue)

Tax Saving Fixed Deposit

Tax saving fixed deposits are available from scheduled banks. These fixed deposit schemes are available with a
tenure of 5 years. Investors can claim a maximum of Rs.1.5 lakhs as tax benefits through tax saving fixed
deposits as per Section 80C of the Income Tax Act. Top banks offering tax saver FDs in India are:

ICICI Bank
HDFC Bank
Axis Bank
IDBI Bank
SBI

Tax Saving Sections

Section 80C allows for exemptions up to Rs.1.5 lakhs per annum through investments in a list of schemes and
instruments as described in the section rules. Apart from 80C, there are various other sections of the Income Tax
Act that provide exemptions to taxpayers. Major sections include:

Section 80D: Exemption on medical insurance premiums for self, spouse or children. Maximum
exemption of Rs.25,000.
Section 80DD: For treatment or maintenance of a physically disabled
dependent. Maximum exemption of Rs.15,000 for individuals and Rs.20,000 for senior citizens.
Section 80E: Exemption for education loan interest repayment. Full interest amount deductible for 8 years
maximum.
Section 80G: Exemption on charitable donations. Maximum exemption of 100% of investments.
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Section 80GG: Exemption on house rent paid, subject to a maximum of Rs.2,000 per month or rent paid
not more than 10% of income or 25% of overall income.
Section 80GGC: Full exemption on funds contributed to political parties.
Section 80U: Rs.75,000 exemption if taxpayer is disabled and Rs.1.25 lakhs exemption if taxpayer is
severely disabled.

Tax Top Pages

Income Tax
Income Tax Act
TDS Online Payment Process
Efiling Income Tax
Income Tax Return
How to calculate Income Tax on Salary
Online Tax Payment
Income Tax Refund
Gratuity
How to Calculate HRA
Efiling Income Tax Return
GST
7th Pay Commission
TDS
Form 16

Tax Other Pages

Form 15H
Tax Credit
Withholding Tax
Custom Duty
Tax Evasion
Tax Rebate
Gross Salary
Professional Tax
Trademark Registration
Corporate Tax
Net Salary
Tax Exemption
Securities Transaction Tax
Advance Tax
House Rent Allowance

News About Tax Saving Schemes

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10/4/21, 11:31 AM All About Income Tax Saving Schemes and Sections

Deadline for 2019-20 tax saving investments extended to end of July 2020 by IT
department

The Income Tax department of India has extended the deadline for payment tax saving investment or
payment for the financial year 2019-20 up to 31 July in order to provide relief to taxpayers amid the
ongoing COVID-19 crisis.

The IT department in a tweet said, “Understanding & keeping in mind the times that we are in, we have
further extended deadlines. Now, Tax Saving Investments/Payments for FY 2019-20 can be made up to
31st July, 2020. We do hope this helps you plan things better.”

The extension of the deadline is for allow taxpayers claim deductions under Section 80C of the Income
Tax Act, 1961 for various investments, that includes section 80C (for life insurance (LIC), public
provident fund (PPF), national savings certificate (NSC) equity-linked saving scheme (ELSS) and so on),
80D (for medical insurance), 80G (for donations) for 2019-20.

The filing of the income tax returns for FY2018-19 was extended by the government last week by a month
to July 31, 2020, and the deadline for linking Aadhaar with PAN also was extended to March 31, 2021.

Also, the Central Board of Direct Taxes (CBDT) had also extended the due date for the filing of the
income tax return for 2019-20 to November 30, 2020.

30 June 2020

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