Tax Benefits on Investments


tax-benefits Increasingly, there is an awareness to save for the rainy day. Going by the unpredictable nature of life, it makes sense too. However, only saving is not enough. Investing wisely to get maximum returns on your savings is an important step in growing your wealth and catering to your future needs and goals. However, even high returns on investments can leave a frown on your face, thanks to the tax you’d be paying; unless, of course, you have planned your tax as well!

So before you get investing your well deserved annual bonus, check the tax benefits on investments before parking your money in one. Below are some options you might like to consider:

Section 80C – We have discussed in detail about investment options under Section 80C and those with highest return on investment in the previous two posts. In a snapshot, investing in ELSS for investors with moderate risk appetite and a long term investment horizon is the highest yielding option. Next in line is PPF (and VPF) for conservative investors followed by NPS for the extra rebate of INR 50,000 that it provides.

Section 80D (Health Insurance Premium) – Under Section 80D of the Income Tax Act, it is possible to claim deduction for health insurance premium paid for self, spouse and children. The limit for deduction is INR 25,000 (and INR 30,000, for senior citizens). In case you are paying health insurance premium for your parents, you can further claim a deduction of INR 15,000 (and INR 20,000 for senior citizens). Any expenses incurred on preventive health check ups up to INR 5,000 are also deductible under this section.

It is also possible to claim a deduction of up to INR 40,000 for treatment of certain diseases such as AIDS and certain types of cancer for self or dependants. You need a certificate from a registered doctor in order to claim this deduction.

Section 80E (Interest on Education Loan) – Here is another incentive to study further. Invest your bonus to increase your professional knowledge and expertise and also save tax. Under Section 80E of the Income Tax Act, any interest paid on education loan to finance higher education for self, spouse or children is tax deductible. This exemption is available for 8 years or until the interest is paid off in full, whichever is earlier.

Interest on home loan – While Section 80C allows for deduction of INR 1.5 lacs on home loan principal repayment, Section 24 allows a further INR 2 lac for interest repayment yearly for self-occupied property. There is no limit for investment property under Section 24. Investing in a home can be a great idea if you find some cash on hands considering the massive tax benefits you can avail. However, do not buy solely to maximise your tax benefits. Further, selling your property before 5 years will reverse the tax deduction claimed under Section 80C.

Planning your investments in time can save you lots of time and money in the future. Get started on the road to wealth creation by getting in touch with Dr. Celso, well known financial expert and author of the book, Who says money doesn’t grow on trees.


High Yielding Tax Saving Schemes

In the previous post, we discussed in length about how you can save more by planning your tax meticulously under Section 80C of The Income-tax Act, 1961 (the “IT Act”). Now that you are aware of several investment options that will give you the benefit of tax savings, undoubtedly you would be looking for high yielding tax saving schemes to invest your yearly bonus wisely.


Today, we will discuss few investment options that not only provide tax savings but also high returns on your investment. Of course, the final choice depends on many factors including your risk appetite, but one of these options or a mix of few will surely fit the bill.

ELSS – ELSS or Equity Linked Saving Schemes are a top choice for investors owing to high returns, shortest lock-in period of 3 years under Section 80C of the IT Act and ease of investment as transactions can be carried out online once your KYC is complete.

However, investors must keep in mind that ELSS returns are equity linked and market risk is inevitable. Investing in equity has been known to give better returns over a long-term horizon of at least 10 years.

Tip: Apart from investing a lump sum, you can also start a monthly SIP to build your wealth consistently over time.

PPF – PPF or Public Provident Fund is the favourite of conservative investors who do not want to take on market risk. While the interest rate on PPF has been brought down this financial year, it still remains a popular option due to assured returns for investors. While PPF does not provide returns as high as investing in equity, a percentage of your savings may be invested in PPF for mitigating the overall risk of the portfolio.

 Putting extra in your VPF or Voluntary Provident Fund is also a good idea for building your wealth. When you receive your pay hike this month, allocate 20% of the hike to your monthly VPF contribution and build your corpus without feeling the pinch.

NPS – The National Pension Scheme makes it to the list because of the additional tax deduction of INR 50,000 allowed under this scheme. A subscriber simply has to open an NPS account (and get PRAN or Permanent Retirement Account Number) wherein the contributions made in the account are invested in pension funds by experienced fund managers. The system is highly transparent and you can track your investments on a regular basis.

At the age of 60, one can withdraw 60% of the investments and the remaining 40% has to be used to purchase annuity. Only 40% of the withdrawn amount is tax-free and the remaining is taxed at normal rate. Further, while the amount used to purchase annuity is not taxed, annuity payments are taxable.

Apart from these 3 options, investing in ULIPs (Unit Linked Insurance Plans) is also becoming popular. Understandably, it is easy to be confused with so many investment options in the market. Make the right choice by seeking the advice of Dr. Celso, India’s well-known financial advisor and author of the book, Who says money doesn’t grow on trees? Book an appointment now and start your journey towards wealth creation.

Planning your tax effectively under Section 80C of the Income Tax Act


As we have entered the last quarter of the year, most people are waiting for their hard earned yearly bonus with bated breath. And while the figure will certainly bring smiles to most faces, the tax deducted on the amount may curve the smile downwards unless you invest your money wisely.


Most people are aware of the tax deduction of INR 150,000 under Section 80C of the Income Tax Act. In fact, EPF of most employees coupled with their life insurance makes good the amount for this deduction (even though there are several other plans one can invest in, more about this later). However, surprisingly, most of us are not aware of other provisions under which tax deductions can be claimed. Section 80 of the IT Act provides for several situations under which tax deduction can be claimed and it is important to be apprised of these in order to plan your tax effectively.

Under this section, a maximum investment of INR 150,000 in any of the qualifying schemes can be deducted from your total income irrespective of the tax bracket you fall in. For a person that falls in the highest (30 percent) tax bracket, this means a whooping amount of INR 45,000 in savings! Isn’t that great?

Further, you can not only save tax via investing in these specified schemes but also on certain expenditure. Here is a list of investments that are tax deductible under Section 80C of the IT Act:

  • Equity Linked Savings Scheme (ELSS): Investing in ELSS (mutual fund schemes) not only provides higher returns over a long term investment horizon but also tax savings.
  • Unit linked Insurance Plan: ULIPs provide a combination of equity investments and life insurance and tax deduction under Section 80C of the IT Act.
  • Life Insurance Premiums (LIP): Any life insurance premium paid for your own self or your spouse or children is deductible under this section.
  • PPF, PF and VPF – Investments in PPF, employer’s contribution to Provident Fund and additional voluntary contributions (VPF) are tax deductible under section 80C.
  • New Pension Scheme (NPS) – Contributions to NPS are deductible under Section 80CCD but within the combined limit of INR 150,000 under Section 80C. Similarly investments in pension fund can be claimed under section 80CCC.
  • National Savings Certificate (NSC) – Investments in NSC can be claimed for deduction under Section 80C of the IT Act.
  • Your dream home – Apart from the stamp duty and registration charges on your sweet abode, the principal component of the monthly repayment you make qualifies for deduction under Section 80C, while the interest part qualifies for deduction under Section 24 of the IT Act.
  • Fixed Deposits: Tax-saving fixed deposits of 5 years tenure with certain banks are also deductible under Section 80C of the IT Act.