Tax Saving Investments

Tax Saving Investments


Tax saving investments are central to financial planning and growth as they offer tax saving under Section 80C and 80CCC of the Income Tax Act of India – while also acting as a backup plan for unexpected expenses and emergencies.

As individual taxpayers, you pay taxes on your expenses and incomes. Taxes which apply to your expenses are ‘indirect taxes’, and the taxes applicable to your income are the ‘direct taxes’. To reduce the income tax burden, you can go for tax saving investments and claim deductions for the same as per Income Tax Act, 1961.

Basics of Income Tax Investments 

Taxes are one of the essential instruments for the survival of the state. Taxes collected by the Government helps in running the development projects in the country, including defence, and healthcare.

Taxpayers of the country comprise of individuals, firms and institutions. Taxes are inevitable for anyone earning and spending money.

Any person having income above the prescribed basic exemption limit is liable to file an Income tax return for the fiscal year, regardless of the tax liability. Also, you have various options to reduce your Income-tax liability. These are called ‘tax saving instruments.’

But you need to focus on tax saving only if you are liable to pay income tax.

Smart Income Tax Saving Tips

“Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” – F.J. Raymond

Tax saving is a benefit you can avail for selective investment options and expenses. You anyways need to invest money to achieve your financial goals. Investments which save tax can help you in two ways:

  • Invest more and have more disposable income
  • Grow your Investment faster

Then why not, invest in your goals using tax efficient investments.

Here are our top picks for tax saving instruments according to your life stage:

 

Benefits of Moneyback Policy

Smart Income Tax Saving Tips

Benefits of Moneyback Policy

“Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” – F.J. Raymond

Tax saving is a benefit you can avail for selective investment options and expenses. You anyways need to invest money to achieve your financial goals. Investments which save tax can help you in two ways:

  • Invest more and have more disposable income
  • Grow your Investment faster

Then why not, invest in your goals using tax efficient investments.

Here are our top picks for tax saving instruments according to your life stage:

Smart Income Tax Saving for Young Unmarried Tax-Payers & Single Income Couples

If you are in your late 20s and early 30s, and unmarried, or you are married, but only one of you is earning, the best tax saving options for you will be:

  • Buy Term Insurance cover with a Sum Assured equal to 15 to 20 times of your annual income
  • Public Provident Fund (Provide EEE benefits)
  • Allocate at least 20% of your annual income to Market-linked Investment Options which offer EEE benefits. For example:
  • Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life
  • Equity Linked Savings Schemes (ELSS)

 

Start Investing at least 10% of your annual income in a pension fund, like

  • National Pension Scheme (you can save Rs. 50,000 more)
  • Pension Funds from Max Life Insurance

 

Save up to Rs.1 lakh under Section 80D

  • Buy a Mediclaim health insurance cover for self
  • Buy a Mediclaim health insurance cover for parents
  • Cover yourself against critical illnesses like cancer (final stage only), renal failure etc.
  • Get cancer (all stages) cover for self

 

Invest in House Property for an Additional Tax Saving on interest amount up to Rs.2 lakh u/s 24(b)

Smart Income Tax Saving Tips for Single Income Couple - Parents

If you are a parent and one of you is earning, your investment options change a little to suit your financial goals. Investing as per your financial needs will not only help you save tax but also meet the goals of your kids:

Save up to Rs. 1.5 lakh under Section 80C

  • Buy Term Insurance cover with a Sum Assured equal to 15 to 20 times of your annual income
  • Public Provident Fund (PPF)
  • Allocate at least 20% of your annual income to Market-linked Investment Options which offer EEE benefits. For example: Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life, Equity Linked Savings Schemes (ELSS), Child Plans and ULIPs from Max Life
  • Additionally, you can also claim children’s tuition fee for deduction under 80C

 

Invest at least 10% of your annual income in a pension fund, like

  • National Pension Scheme (you can save Rs. 50,000 more)
  • Pension Funds from Max Life Insurance

 

Save up to Rs.1 lakh more under Section 80D

  • Buy a Mediclaim health insurance cover for self, spouse and kids
  • Buy a Mediclaim health insurance cover for parents
  • Cover yourself against critical illnesses like cancer (final stage only), renal failure etc.
  • Get cancer (all stages) cover for self

 

Invest in House Property for an Additional Tax Saving of home loan interest amount up to Rs.2 lakh under Section 24(b)

 

Use education loan to fund the kid’s higher education. The interest on education loan is completely deductible under section 80E

Smart Income Tax Saving Tips for Double Income Couples

If you are married and both of you are earning, jointly you can claim more than Rs.8.5 lakh in deductions with investments and insurance:

  • Save up to Rs.3 lakh under 80C
    • Both of you should buy separate term insurance covers with a sum assured equal to 15 to 20 times of your annual incomes
    • Public Provident Fund (PPF)
    • Allocate at least 20% of your annual household income to Market-linked Investment Options which offer EEE benefits. For example: Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life, Equity Linked Savings Schemes (ELSS)

 

Benefits of Moneyback Policy

Smart Income Tax Saving Tips for Double Income Couples

Benefits of Moneyback Policy

If you are married and both of you are earning, jointly you can claim more than Rs.8.5 lakh in deductions with investments and insurance:

  • Save up to Rs.3 lakh under 80C
    • Both of you should buy separate term insurance covers with a sum assured equal to 15 to 20 times of your annual incomes
    • Public Provident Fund (PPF)
    • Allocate at least 20% of your annual household income to Market-linked Investment Options which offer EEE benefits. For example: Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life, Equity Linked Savings Schemes (ELSS)

Start Investing at least 10% of your annual household income in a pension fund, like

  • National Pension Scheme (you can save Rs.1 lakh more)
  • Pension Funds from Max Life Insurance

If you are a parent

  • One of you can claim the school fee paid (or if you have two kids divide the kids)
  • Invest in Child Plan
  • Save up to Rs.2 lakh under Section 80D

    • Buy a Mediclaim health insurance cover for self (both spouses should opt for separate Mediclaim covers)
    • Buy a Mediclaim health insurance cover for your (applicable to both spouses) parents
    • Cover yourself against critical illnesses like cancer (final stage only), renal failure etc.
    • Get cancer (all stages) cover for self
  • Invest in a House Property for additional Tax Savings on home loan interest up to Rs.4 lakh
    • Invest in joint names or different properties
    • Both spouses can only claim the respective amounts they have paid towards the home loan interest

 

Tax Saving Tips for Retired or Pensioners

  • After retirement, the absence of monthly salary can become a problematic situation if enough funds are not available to manage your regular expenses
  • You can overcome this problem by opting for annuity schemes, which not only provide regular income in your golden days but also help save on taxes
  • ‘Senior Citizen’s Saving Scheme’ is one such annuity scheme, which is the first choice of most retirees
    • The scheme is available only to individuals above 60 and can be availed from a post office or a bank
    • Investments in this scheme are eligible for tax benefits under Section 80C and allow premature withdrawals as well
  • Insurance companies also offer special annuity products, which provide a regular income post-retirement
  • Annuity plans provide tax benefits as no tax is charged on your invested money until you plan to withdraw it
  • Besides annuity plans, Unit Linked Insurance Plans (ULIPs) also make a good tool for retirement fund creation
  • Moreover, keeping your funds invested in ULIPs allows you tax benefits under:
    • Section 80C: tax exemption of up to Rs.1.5 lakh on your premiums
    • Section 10D: allows you to withdraw tax-free proceeds at maturity
  • This saves a substantial amount of your money as these tax-free withdrawals help replace your taxable pension (as withdrawals on annuity plans are taxed)
  • You can invest into the following tax-saving instruments you can avail benefits under section 80C and beyond

 

Smart Tax Saving Tip for Tax-payers Falling in the Highest Tax Bracket

  • When you fall into the highest tax bracket and have exhausted all options of tax saving, you can reduce your taxable income by:
    • Transferring large sums to your non-earning spouse against an asset, like jewellery, etc.
    • Invest in the name of your parents who are retired and may fall into the lower tax bracket
    • Do not though,any transfer of an asset without adequate consideration will lead to clubbing of the income of that asset in your hands

 

Smart Tax Saving Tips If You Are Running a Family Business

The business itself offers huge tax saving opportunity in the early stages. However, once you have a long-established business becoming a cash cow, your income from the business assets may rise greatly.

If your income from the family business is landing you and your family in the top tax brackets, you can form an HUF to reduce the tax outgo. HUF can help you evenly distribute the income among the family members and reduce your overall tax outflow on the income.

Income Tax Liability

Are You Liable to Pay Income Tax?

Indian direct tax system offers a calculation of tax liability based on tax slabs. It also offers a minimum threshold for zero tax liability, based on the age of the taxpayer. Meaning, if your taxable income falls within the first (lowest) slab, your tax liability would be zero.

According to the Interim Budget 2019, Individual taxpayers with taxable annual income up to Rs.5 lakh are eligible to receive full tax rebate under Section 87A, and therefore, will not have to pay any income tax. in addition, the income tax slabs and rates will remain unchanged for the FY 2019-20.

What is the Minimum Threshold for Income Tax?

The minimum income threshold depends on the age of the taxpayer (Resident/ Non-resident). The minimum threshold is:

 

Income Tax Liability

Are You Liable to Pay Income Tax?

Indian direct tax system offers a calculation of tax liability based on tax slabs. It also offers a minimum threshold for zero tax liability, based on the age of the taxpayer. Meaning, if your taxable income falls within the first (lowest) slab, your tax liability would be zero.

According to the Interim Budget 2019, Individual taxpayers with taxable annual income up to Rs.5 lakh are eligible to receive full tax rebate under Section 87A, and therefore, will not have to pay any income tax. in addition, the income tax slabs and rates will remain unchanged for the FY 2019-20.

What is the Minimum Threshold for Income Tax?

The minimum income threshold depends on the age of the taxpayer (Resident/ Non-resident). The minimum threshold is:

  • Rs.2.5 lakh if you are below the age of 60 or filing tax as a Hindu Undivided Family (HUF)
  • Rs.3 lakh if your age is 60 to 79 years
  • Rs.5 lakh when you are 80 years and above

What will be the Tax Liability After the Minimum Threshold?

After you cross the minimum threshold, your excess income becomes taxable at the following rates:

For Individuals below the Age of 60 Years

Income Tax Slab (in Rs.)

Applicable Tax

Up to 2,50,000

Nil

2,50,001 to 5,00,000

5%

 5,00,001 to 10,00,000

Rs. 12,500 + 20% of total income exceeding  5,00,000

Above 10,00,000

Rs. 1,12,500 + 30% of total income exceeding  10,00,000


For Individuals of the Age of 60 or above But Less Than 80 Years (Senior Citizens)
   

Income Tax Slab (in Rs.)

Applicable Tax

Up to 3,00,000

Nil

 3,00,001 to 5,00,000

5%

 5,00,001 to 10,00,000

Rs. 10,000 + 20% of total income exceeding  5,00,000

Above 10,00,000

Rs. 1,10,000 + 30% of total income exceeding  10,00,000

 

For Individuals of the Age of 80 Years or above (Super Senior Citizens)
 

Income Tax Slab (in Rs.)

Applicable Tax

Up to 5,00,000

Nil

 5,00,001 to 10,00,000

20%

Above 10,00,000

Rs. 1,00,000 + 30% of total income exceeding  10,00,000


Also, if your total income is up to Rs.5 lakh, you are eligible for a full tax rebate under section 87A.

There is a 4% Cess of tax applicable across income groups. In addition, there is a Surcharge at:

  • 10% for income above Rs.50 lakh but upto Rs.1 crore
  • 15% for income above Rs.1 crore but upto Rs.2 crore
  • 25% for income above Rs.2 crore but upto Rs.5 crore
  • 37% for income above Rs.5 crore 

The slabs are applied to the total income. However, the minimum tax exemption limit will vary as per the individual taxpayer’s age.

That means if you are below 60, and your annual taxable income had been Rs.7 lakh your income tax liability can go up to Rs.52,500 plus cess, for FY 2019-20.

That is, 5% of Rs.2.5 lakh (Rs.2.5 lakh to Rs.5 lakh) after the minimum exemption threshold (Rs.2.5 lakh) and 20% of remaining Rs.2 lakh.

But this is a hypothetical scenario, where you have zero tax saving investments or spends.

If you allocate your savings in tax saving investments through the financial year, you may reduce your tax liability to as low as zero.

How to File Your Income Tax Return? 

  • You can file your income tax return electronically on the income-tax portal incometaxindiaefiling.gov.in provided by the Government of India
  • Filing the return online is an easy and straightforward process. First, you need to create your login on the e-filing portal. You will need your PAN card details to create the login. It is advisable to assign your Aadhaar Number as well to your ITR for easier processing
  • Once you log in to the account, you can select your assessment status and year of filing to access the applicable ITR form
  • Fill the information in the ITR form as prompted. If you are salaried, it is recommended to use Form 16from your employer and 26AS as well, while filing ITR online
  • Alternatively, you can engage the services of a Tax Return Preparers (TRPs) authorized by the Government of India

What is the Maximum Tax Saving That You Can Avail?

Considering that you maximize your tax savings using investments, and voluntary spends, you may reduce your taxable income by Rs. 4,75,000 (details below) for FY 2019-20 (AY 2020-21.)

Rs. 4,75,000 includes the following commonly available deductions:

Deductions

Max Amount (Rs.)

Standard deduction

50,000

Section 80C

150,000

Section 80CCD(1B) NPS

50,000

Section 80D

25,000

Section 24(b)

200,000

Total

4,75,000

Disclaimer: This limit only includes, investments and expenses any taxpayer can voluntarily incur.

The amount of tax you end up saving through the investments and expenses above depends on your income. See the cases below to get an idea:

CASE 1 

Shobhit is a 27-year old Business Analyst. His taxable income in the financial year 2019-20 is Rs. 7,50,000 (without TDS).

His tax liability for FY 2019-20 would be:

  • Rs. 52,520*without tax saving investments (after standard deduction & deduction u/s 80TTA)
  • Zero tax liability with maximum tax saving investments (after deduction u/s 80TTA and other deductions)

* as per the applicable tax slabs & cess

See Calculation Details

Without any tax savings, Shobhit’s net taxable income (Rs. 750,000) goes up into the 20% tax slab. Without tax saving investments his total tax would be:

Total Taxable Income

Rs. 750,000

(Minus) Tax Saving Investments/Spends – Standard Deduction

Rs.(50,000)

(Minus) Section 80TTA (savings in banks, post office, etc)

(10000)

Net Taxable Income

Rs.690,000

Tax on Net Taxable Income:

 

20% of Rs. 190,000 (Rs.690,000 – Rs.500,000)

Rs. 38,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 12,500

Total Tax on Income

50,500

(Add) 4% Cess

+ 2020

Total Tax Payable in FY 2019-20

Rs. 52520

However, with tax saving:

Total Taxable Income

Rs. 750,000

(Minus) Tax Saving Investments/Spends

Rs.(475,000)

(Minus) Section 80TTA (savings in banks, post office, etc)

(10000)

Net Taxable Income

Rs.265,000

Tax on Net Taxable Income:

 

5% of Rs. 15,000 (265,000 – 250,000)

Rs.750

Rebate u/s 87A (Rs.12,500 or Actual Tax payable; whichever is less)

Rs.(750)

Total Tax on Income

NIL

CASE 2

Rajni is a 40 year old businesswoman and runs her own clothing store. Her taxable income in the financial year 2019-20 is Rs. 15,00,000.

She will need to pay the following amount as tax on her income in FY 2019-20:

Rs. 2,69,880* if she does not invest or spend anything for tax saving (after deduction under Section 80TTA)

Rs. 137,280* if she maximizes her tax saving investments (after other deductions & deduction u/s 80TTA)

* as per the applicable tax slabs & cess

She can save Rs. 132,600 in direct taxes using tax saving investments.

See Calculation Details

Without any tax savings, Rajni’s net taxable income (Rs. 15,00,000) goes up into the 30% tax slab. Thus, the total liability of Rs. 269,880:

Total Taxable Income

Rs. 15,00,000

(Minus) Tax Saving Investments/Spends Section 80TTA

10000

Net Taxable Income

14,90,000

Tax on Net Taxable Income:

 

30% of Rs. 490,000 (14,90,000 – 10,00,000)

Rs. 147,000

20% of Rs. 500,000 (10,00,000 – 500,000)

+ 100,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 12,500

Total Tax on Income

Rs. 259,500

(Add) 4% Cess

+ 10,380

Total Tax Payable in FY 2019-20

Rs. 269,880

 

However, with maximum tax saving, the breakup of her net taxable income and tax implication is as follows:

Total Taxable Income

Rs. 15,00,000

(Minus) Tax Saving Investments/Spends (475000 – 50000)**

(Rs. 425,000)

(Minus) Section 80TTA (savings in banks, post office, etc)

(10000)

Net Taxable Income

Rs.10,65,000

Tax on Net Taxable Income:

 

30% of Rs. 55,000 (10,65,000 – 10,00,000)

19500

20% of Rs. 5,00,000 (10,00,000 – 500,000)

Rs. 100,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 12,500

Total Tax on Income

132,000

(Add) 4% Cess

+ 5280

Total Tax Payable in FY 2019-20

Rs. 137,280

**As Rajni is a businesswoman, she will not get the benefit of Standard Deduction of Rs. 50000. As the benefit of standard deduction is only provided to the salaried individuals.

Rajni can save up to Rs. 132,600 (Rs.269,880 – Rs.137,280) by maximizing her tax saving investments in F.Y. 2019-20.

CASE 3

Mukesh is 65 years old. He’s one of the Directors of a Consumer Electronics Firm. His taxable income in F.Y. 2019-20 has been Rs. 20,00,000

Mukesh will need to pay the following amounts as income tax in FY 2019-20:

Up to Rs. 3,95,200*without tax saving investments (after standard deduction & deduction u/s 80TTB)

Only Rs. 2,62,600*with maximum tax saving investments (after deduction u/s 80TTB & other deductions)

* as per the applicable tax slabs & cess

See Calculation Details

Without any tax savings, Mukesh goes up into the 30% tax slab with his net taxable income of Rs. 20 lakh. Thus, the total liability of Rs. 3,95,200:

Total Taxable Income

Rs. 20,00,000

(Minus) Tax Saving Investments/Spends (Standard Deduction)

(50,000)

(Minus) Deduction of Interest on Bank Savings, Post Office under Section 80TTB for Senior Citizens**

(50000)

Net Taxable Income

19,00,000

Tax on Net Taxable Income:

 

30% of Rs. 9,00,000 (19,00,000 – 10,00,000)

Rs. 2,70,000

20% of Rs. 500,000 (10,00,000 – 500,000)

+ 100,000

(Add) 5% of Rs. 200000 (500,000 – 300,000)

+ 10,000

Total Tax on Income

3,80,000

(Add) 4% Cess

+ 15200

Total Tax Payable in FY 2019-20

Rs. 3,95,200

**As Mukesh is a senior citizen, he can avail deduction on bank saving, post office interest up to Rs.50000 under Section 80TTB.

Minimum tax-exempt income is Rs. 300,000 for taxpayers between 60 and 79 Years of age

Although even with maximum tax saving, his net taxable income remains in the highest tax bracket, it reduces enough to reduce his total tax liability by little more than Rs. 132600:

Total Taxable Income

Rs. 20,00,000

(Minus) Tax Saving Investments/Spends

(Rs. 4,75,000)

(Minus) Deduction of Interest on Bank Savings, Post Office under Section 80TTB for Senior Citizens**

(50000)

Net Taxable Income

14,75,000

Tax on Net Taxable Income:

 

30% of Rs. 4,75,000 (14,75,000 – 10,00,000)

Rs. 1,42,500

20% of Rs. 500000 (10,00,000 – 500,000)

+100000

(Add) 5% of Rs. 200000 (500,000 – 300000)

+ 10,000

Total Tax on Income

2,52,500

(Add) 4% Cess

+ 10100

Total Tax Payable in FY 2019-20

Rs. 2,62,600

**Under Section 80TTA, regular individuals can claim a deduction up to Rs.10000 only. As Mukesh is a senior citizen, he can avail deduction on bank saving, post office interest up to Rs.50000 under Section 80TTB.

Income Tax Investments Under Section 80C

The commonly available deductions are available to any Indian tax-payer. Thus, if you are filing your income tax returns as a resident Indian, salaried or self-employed, or as a non-resident Indian (NRI) you can use these deductions to reduce your taxable income and tax liability.

Claim Deductions up to Rs.1.5 lakh under Section 80C

Section 80C consists of multiple investments and expense items. If you invest money in any of the products or expenses listed below, you can reduce your taxable income by up to Rs.1.5 lakh.
 

SR. NO

INVESTMENTS ELIGIBLE FOR TAX DEDUCTIONS

DESCRIPTION

1

Home Loan Principal Repayment

Applicable to the first house property.

Home loan EMI consists of two major components: Principal and Interest.

Section 80C allows you to claim tax benefits on the principal paid.

2

Life Insurance Premiums

Life insurance premium, including payments for unit linked insurance plans, are eligible for tax benefits under section 80C.

 

The limit for claiming the benefits is Rs.1.5 lakh, which means if you make no other investments but pay Rs.2 lakh towards your life insurance policy, then Rs.1.5 lakh will be eligible for tax benefits.

 

*Exemption allowed for premium upto 10% of sum assured (20% if policy issued before 01.04.2012)

3

Five-Year Bank Fixed Deposits

Term deposit with a tenure of at least five years qualify for deduction under section 80C.

4

Equity Linked Savings Schemes (ELSS)

Investment in mutual funds, especially the equity-linked savings scheme makes you eligible for tax exemption under this section.

 

ELSS funds provide maximum tax benefit up to Rs.1.5 lakh per annum and come with a lock-in period of 3 years.

5

Provident Funds

All contributions made under different types of provident funds like PPF (Public Provident Fund), EPF (Employee Provident Fund) and VPF (Voluntary Provident Fund) are eligible for tax benefits under Section 80C.

6

National Pension Scheme (NPS)

Investment into Tier I account (meant for retirement) of NPS, is eligible for deduction under sec 80C

6

National Savings Certificate (NSC)

Investment made in these certificates, which come with a maturity period of 5 and 10 years, is also eligible for tax benefits up to Rs. 1.5 lakh.

7

Sukanya Samriddhi Account

Announced by the Indian government in early 2015, this special account allows parents to open an account for their girl child. Parents can deposit money up to Rs.1.5 lakh each year.

8

School/College Education Expenses

The amount paid by parents as tuition fees of their children, (at the time of admission or thereafter), is eligible as a deduction under Section 80C.

 

However, the fees should be paid to a school, college, or university in India only.

9

Pension Funds

You can secure your retirement by investment in pension funds and become eligible for deduction under this section.

10

Senior Citizen Saving Scheme

This scheme is available only for individuals in 60 or above age group. The investment made into this scheme makes you eligible for tax benefits under this section.

11

Post Office Time Deposits

Similar to bank fixed deposits, time deposits held at post office also are eligible for tax benefits under section 80C.

Increasing Your Deduction to Rs.2 lakh under Section 80C

Section 80CCD(1B) - For NPS Subscribers

This is possible only for NPS, NPS Lite and Atal Pension Yojana (APY) subscribers. Under section 80CCD (1) subscribers of NPS Tier-I (retirement savings account) can claim deduction up to the normal 80C limit of Rs. 150,000.

Additionally, you can claim deduction of up to Rs. 50,000 under Section 80CCD (1B) which is for contributions made by individual taxpayers towards NPS, NPS Lite & APY. So, the total exemption limit available becomes Rs.2 lakh:

  • Rs.1.5 lakh (Section 80C + Section 80CCD (1) + Section 80CCC)
  • Rs.50,000 under Section 80CCD(1B)

Tax Saving Investment Options

Investment options which enjoy all the three types of exemptions are the best, or most tax-efficient. Usually, the order of exemption goes as follows:

 

Best Tax Saving

Still Better

Okay Option

Invested Money

Exempt

Exempt

Exempt

Interest/Income

Exempt

Exempt

Taxable

Maturity Value

Exempt

Taxable

Taxable

Investment type

EEE

EET

ETT

EEE Investment Options with Max Life Insurance

Max Life Insurance offers multiple investment plans which can save your income tax under 80C and offer tax exempt growth. You can invest in multiple of these plans as per your financial goals and needs.

Term Insurance Plans & Protection Plans

  • Max Life Super Term
  • Max Life Online Term Plan Plus

Market Linked Investment Plans for Long-term goal planning (ULIPs)

  • Max Life Fast Track Super Plan
  • Max Life Platinum Wealth Plan
  • Max Life Online Savings Plan

Children’s Education Goal Investment Options

  • Max Life Future Genius Education Plan
  • Max Life Shiksha Plus Super

Retirement Planning Investment Options

  • Max Life Forever Young Plan
  • Max Life Guaranteed Lifetime Income Plan
  • Max Life Perfect Partner Super

Guaranteed Saving and Income Plans

  • Max Life Savings Advantage Plan
  • Max Life Monthly Income Advantage Plan
  • Max Life Assured Wealth Plan
  • Max Life Whole Life Super Plan
  • Max Life Life Gain Premier
  • Max Life POS Guaranteed Benefit Plan

Best Tax Saving Investments under Section 80C

Some popular tax-saving options for individuals in India are under Section 80C of the Income Tax Act. It encompasses multiple investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year. Following are some of the best tax saving investment options under Section 80C of the Income Tax Act, 1961:

Investment

Returns

Lock-in Period

5-Year Bank Fixed Deposit[2]

5.30% to 7.25%

5 years

Public Provident Fund (PPF)[1]

7.1%

15 years

National Savings Certificate[1]

6.8%

5 years

National Pension System (NPS)[4]

Varies with Plan Chosen & Tenure

Till Retirement

ELSS Funds [3]

15.42% to 32.67%

3 years

Unit Linked Insurance Plan (ULIP)

Varies with Plan Chosen

5 years

Sukanya Samriddhi Yojana (SSY) [1]

7.60%

N/A

Senior Citizen Saving Scheme (SCSS) [1]

7.40%

5 years

Note: Data mentioned above are as on 2nd August, 2021 and are subject to change without prior information.

Source:

[1] https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx (2021)

[2] https://www.livemint.com/money/personal-finance/taxsaving-deposits-with-best-rates-11615896758990.html (2021)

[3] https://www.valueresearchonline.com/funds/best-tax-savers/?return-period=3Y (2021)

[4] http://www.npstrust.org.in/return-of-nps-scheme (2021)

Why Should You Choose MAX LIFE INSURANCE

Best Term Plan Company of the year*^*
99.35%**^ Claims Paid
IRDAI Registered Registration No. 104

Deduction up to Rs. 75,000 under Section 80D for Medical Insurance & Expenses

Section 80D offers a tax deduction for the following investments/expenses:

  • Premiums paid for Mediclaim/Health Insurance
  • Premium paid for critical illness health insurance plans
  • Preventive health check expenses

Healthcare expenses for senior citizen parents

DESCRIPTION

HEALTH PREMIUM PAID FOR

MAX DEDUCTION
UNDER SECTION 80D

SELF, SPOUSE AND DEPENDENT CHILDREN

PARENTS

Everyone is below 60 years of age

Rs. 25,000

Rs. 25,000

Rs. 50,000

When your parents have crossed the age of 60

Rs. 25,000

Rs. 50,000 (incl. Expenses)

Rs. 75,000

You and your parents have passed the age of 60

Rs. 50,000

Rs. 50,000 (incl. Expenses)

Rs. 1,00,000

Preventive healthcare expense of up to Rs. 5000 is part of the maximum limit under this Section.

Example of Estimating Deduction Under Section 80D

Paramjit is 37 years old and married to Kiran, both are employed. They have two kids. Paramjit’s parents are financially independent, but Paramjit pays their health insurance premiums, as they don’t want to buy a health plan at their age. They are over 70 years of age. Similarly, Kiran has bought a senior citizen health plan for her parents.

Paramjit and Kiran have paid the following amount of premiums and care expenses in the F.Y. 2019-20:

Paramjit paid:

  • Rs. 18,000 for family floater policy covering him, Kiran and the kids
  • Rs. 4,000 for critical illness health insurance for self
  • Rs. 48,000 for family floater Mediclaim for his senior citizen parents

Kiran paid:

  • Rs. 3,500 for critical illness cover for self
  • Rs. 42,000 for Mediclaim cover for her parents
  • Rs. 12,000 on preventive healthcare for the family (not the parents)

Since both Param and Kiran file their separate ITRs, they can claim the following amounts under Section 80D:

Item

Param

Kiran

Family Floater Mediclaim Premium

18,000

 

Critical Illness Health Cover Premium

4000

3500

Premium Paid for Health cover for Senior Citizen Parents

48,000

42,000

Preventive Healthcare expenses (Max. 5000)

 

5,000

Total Applicable Claim

70,000

50,500

Thus, Paramjeet can claim Rs. 70,000 as deduction under Section 80D while Kiran can claim Rs. 50,500 (whereas she spent about Rs. 57,500).

Health Insurance Plans with Max Life Insurance

Max Life Insurance offers two health insurance plans which are eligible for 80D deduction:

  • Critical Insurance Plan covering 40 critical illnesses
  • Cancer Insurance Plan covering all stages of cancer

Deduction up to Rs.2 lakh under Section 24(b) for Home Loan Interest

Deduction up to Rs. 200,000

Buying a house can offer you an additional deduction if you avail a home loan from a housing finance institution or bank.

The limit of deduction on home loan interest paid is Rs.2 lakh for the current financial year (2019-20).

The limit for the financial year 2019-20 is same whether you are filing a return for all the following conditions:

  • Self-occupied house
  • Vacant house (neither self-occupied nor let-out)

Individuals can also claim deduction up to Rs.1.5 lakh on home loan interest under Section 80EEA, which is extended by the government for affordable housing. You can only avail this if:

  • The value of the house is not more than Rs.45 lakh
  • You should not own any other house property on the date of home loan sanction
  • Loan should be taken during the FY 19-20

Apart from the home loan interest following expenses also reduce your taxable income from house properties:

  • Municipal taxes
  • Standard Deduction of 30% of net annual value (NAV) for the property
  • Standard Deduction - for Salaried Taxpayers

Other Tax Deductions for FY 2019-20

  • Tax Saving for Tax-Payers Staying on Rent
  • Tax Saving for Salaried Individual Living on Rent

If salary is the major taxable income for you, you should look for the House Rent Allowance (HRA) on your salary slip. HRA is usually 50% of your basic salary and the second highest component of it.

How to Calculate HRA Tax Exemption?

HRA received by you from your employer is taxable based on the following conditions:

The tax-exempt portion of the HRA is the minimum of the following:

  • Actual HRA received in the financial year
  • 50 percent of your 'salary' if your accommodation is in metro cities (Mumbai, Chennai, Delhi, Kolkata) or else 40 percent for other cities
  • Rent paid minus 10 percent of your ‘salary’

Definition of Salary for HRA: Basic salary + dearness allowance (DA) (only that part which forms part of the retirement benefit) + commission received based on a percentage of turnover

Example of HRA Calculation

Mr Kiran lives in Mumbai and earns a basic salary of Rs. 30,000. The actual rent paid by Kiran is Rs 10,000 and the HRA component of his salary is Rs. 15,000. In this case, how much exemption will he get?

To determine the exemption, calculate the amount for different factors affecting HRA calculation:

Actual HRA received:

Rs 15,000 x 12

Rs 180,000

Actual rent paid - excess rent paid over 10% of the salary

(Rs 10,000 x 12) – (10% of Rs 30,000 x 12)

84,000

50% of basic salary:

[(Rs 30,000 x 12) x 50%]

180,000

As Rs. 84,000 is the least among the above figures, Mr Kiran will get an amount of Rs. 84,000 exempted.

Tax Saving for Self-Employed Living on Rent

You can still claim a deduction for the house rent paid, even if you are self-employed or do not receive HRA along with your salary.

Section 80GG of the Indian Income Tax Act allows a deduction of up to Rs. 60,000 for F.Y. 2019-20.

The deduction is applicable on per month basis with maximum amount limited to Rs. 5000 a month.

The amount you can claim a deduction will be the least out of the following:

  • Rs. 5000 per month
  • 25% of total income
  • The amount of actual rent paid over 10% of income

See the example below to understand how much will apply to you:

Sandeep stays in a PG accommodation and pays Rs. 4500 as monthly rent starting Jan 2018. He paid the same rent till December 2018 and then the rent will increase to Rs. 5000 per month.

Sandeep is employed and earned salary income of Rs. 300,000 for the financial year 2019-20. He does not receive HRA.

Total amount of deduction he can claim under section 80GG will be the lowest of:

Rs. 5000 per month or Rs. 60,000

25% of Rs. 300,000 or Rs. 75,000

(Rent Paid – 10% of Salary) or (55,500 – 30,000) = Rs. 25,500

Thus, Sandeep can claim Rs. 25,500 as deduction under section 80GG.

Other Deductions & Exemptions Available to Indian Tax-Payers

TYPES OF TAX SAVING ACTIVITIES

SECTION

MAX DEDUCTION LIMITS

Expenses on a handicapped dependent

 

80DD

For Disability more than 40% but up to 80%: Rs. 75,000

For severe disabilities (above 80%): Rs.1.25 Lakh

Treatment of specified illnesses for self or dependent

 

80DDB

Based on Taxpayer’s Age:

Less than 60 years - Rs. 40,000

60 years or Above- Rs. 1,00,000

Education loan interest payment

80E

Actual interest paid (for initial 8 years)

Home loan interest payment for first-time home-owners

80EE

Up to Rs. 50,000 (additional deduction over sec. 24(b))

Donations to approved charitable institutes

80G

50% or 100% of the donated amount

Contributions made to a political party by companies and individuals respectively

80GGB

80GGC

Nil. 100% actual contribution made, by other than cash only.

Saving account interest

80TTA

Up to Rs. 10,000

Handicapped tax-payers can claim this deduction

80U

Disability more than 40% but up to 80% - Rs.75,000
Severe disabilities (above 80%) - Rs.1.25 lakh

Royalty or patent income

80RRB

Up to Rs. 3 lakh

Received Gift

56(2)

Up to Rs. 50,000

How to Form a HUF?

A Hindu, Sikh, Jain or Buddhist family with at least one male member can form an HUF

  • Create the Deed for HUF
  • Karta can transfer income generating assets to HUF as gifts
  • Get a separate PAN card for the HUF
  • Open a bank account in the name of HUF

What are the Benefits of Forming an HUF?

There are several advantages of forming an HUF such as:

  • Family members can split the family’s income and file taxes separately, thus reducing their tax liability on both individual and HUF tax return.
  • Ancestral joint family assets are not a requirement for the HUF to exist.
  • Women in the family can make a gift towards the HUF and gift property in their name.
  • Getting loans is easier for the members of an HUF.
  • The official status of an HUF and its control can remain with the women of the family in the event of the death of the last male member, without any need to dividing the acquired or ancestral assets of the HUF.
  • Women can be the co-partner with their husband (or Karta) in the HUF even though they cannot start a separate account on their own
  • HUF can act as a taxpayer and invest in tax saving instruments
  • Impact of forming an HUF on Family’s Tax Liabilities

Let us understand the significance of HUF’s and their impact on tax savings with an example.

Consider a family of four - husband, wife and two children. Husband’s income is Rs.24 lakh, and his wife’s income is Rs. 18 lakh. They also have a family run business from which the annual earnings amount to Rs. 8 lakh. These earnings can be either taxed in the hands of husband, wife or both.

Situation 1

If the earnings are taxed in the hands of the husband, who is currently in 30% tax bracket, he would require paying 30% of Rs. 8 lakh, i.e. Rs. 2.4 lakh as tax.

Situation 2

If the earnings are taxed in the hands of the wife, who is currently in 30% tax bracket, again she would require paying 30% of Rs. 8 lakh, i.e. Rs. 2.4 lakh as tax.

Situation 3

If the earnings are taxed equally in the hands of both husband and wife, both would require paying tax at 30% on Rs. 4 lakh, i.e. Rs 1.2 lakh each.

Situation 4

However, if the income from the family-run business is taxed in the hands of HUF, the tax payable by the HUF as computed as per the tax slabs would be approx. Rs. 75,000.

Therefore, taxing the earnings from the family-run business under HUF would lead to a tax saving of Rs. 1,65,000 lakh per annum (Rs. 2,40,000 – Rs. 75,000).

Appendix 1: Tax Slabs & Total Liabilities FY 2019-20 (AY 2020-21)

Health & Education Cess at 4% of Max Tax Liability will apply to all taxpayers.

Tax Slab for Individuals below 60 Years of Age

AGE

INCOME TAX SLABS

TAX RATE

MAX. LIABILITY (Rs.)

 

Less than 60 years

Up to 2,50,000

Nil

Nil

2,50,001 to 5,00,000

5%

12,500

5,00,001 to 10,00,000

20%

112,500

More than 10,00,000

30%

112,500 + 30% of (Income – 10 Lakh)

Tax Slab for Individuals ageing between 60 to 80 years (Senior Citizens)

AGE

INCOME TAX SLABS

TAX RATE

MAX LIABILITY (Rs.)

60 years to 79 years

Up to 3,00,000

Nil

Nil

3,00,001 to 5,00,000

5%

10,000

5,00,001 to 10,00,000

20%

110,000

More than 10,00,000

30%

110,000 + 30% of (Income – 10 Lakh)

Tax Slab for Individuals ageing 80 Years or above (Super Senior Citizens)

AGE

INCOME TAX SLAB

TAX RATE

MAX LIABILITY (Rs.)

 

 80 years or above

Up to 2,50,000

Nil

Nil

2,50,001 to 5,00,000

Nil

Nil

5,00,001 to 10,00,000

20%

100,000

More than 10,00,000

30%

100,000 + 30% of (Income – 10 Lakh)


Surcharge on the Tax

If your taxable income is more than Rs. 50 Lakh in the financial year 2019-20, a surcharge may apply to the total tax payable.

The surcharge, like the Health & Education Cess, is applicable to the tax payable on the total taxable income. The surcharge can be calculated using the below-mentioned rates:

Surcharge: 10% of income tax, where the total income exceeds Rs.50 lakh up to Rs. 1 crore

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore but upto Rs. 2 crore

 Surcharge: 25% of income tax, where the total income exceeds Rs.2 crore but upto Rs. 5 crore

Surcharge: 37% of income tax, where the total income exceeds Rs.5 crore

Appendix - 2: Deductions Available to Resident Individuals & HUF

TYPES OF TAX SAVING ACTIVITIES

SECTION

MAXDEDUCTION AMOUNT

Investments & Expenses

80C

up to Rs. 1,50,000

80CCC and 80CCD(1)

Additional NPS Investments

80CCD(1B)

up to Rs. 50,000

Expenses on a handicapped dependent

 

80DD

For Disability more than 40% but up to 80% - Rs. 75,000

For severe disabilities (above 80%)–Rs.1.25 lakh

Treatment of specified illnesses for self or dependent

 

80DDB

Age

Less than 60 years - Rs.40,000 
60 or above – Rs.1,00,000

Education loan interest payment

80E

Nil. Actual interest paid

Home loan interest payment for first-time home-owners

80EE

Up to Rs.50,000

Donations to approved charitable institutes

80G

50% or 100% of the donated amount

Rent paid by employees not having HRA

80GG

Lesser of the following:

25% of total income

Rs.5000 per month

Rent paid to exceed 10% of total income

Contributions made to a political party by companies and individuals respectively

80GGB

80GGC

Nil. 100% actual contribution made, by other than cash only.

Saving account interest

80TTA

Up to Rs.10,000

Handicapped tax-payers can claim this deduction

80U

Disability more than 40% but up to 80% - Rs.75,000
Severe disabilities(above 80%) - Rs.1.25 lakh

Royalty or patent income

80RRB

Up to Rs.3 lakh

Received Gift

56(2)

Up to Rs. 50,000

Appendix 3: Deductions Available to NRIs and PIOs (Person of Indian Origin)

TYPES OF TAX SAVING ACTIVITIES

SECTION

MAX DEDUCTION AMOUNT

Investments & Expenses

80C

up to Rs. 150,000

80CCC and 80CCD(1)

Education loan interest payment

80E

Nil. Actual interest paid

Home loan interest payment for first-time home-owners

80EE

Up to Rs. 50,000

Donations to approved charitable institutes

80G

50% or 100% of the donated amount

Contributions made to a political party by companies and individuals respectively

80GGB

80GGC

Nil. 100% actual contribution made by other than cash only.

Saving account interest

80TTA

Up to Rs. 10,000

Royalty or patent income

80RRB

Up to Rs. 3 lakh

Received Gift

56(2)

Up to Rs. 50,000

 

ARN No:- PCP/TSI/230921

Check out the different Online Insurance Plans from Max Life!

Check out the different Online Insurance Plans from Max Life!

Why Choose Max Life

Here are some of the numbers which speak about our accomplishments

Why Choose Max Life

Here are some of the numbers which speak about our accomplishments
Claims Paid Percentage

99.35%

99.35%

(Source : Max life annual audited financials FY 20-21)

Max Life Presence

277 Offices

277 Offices

(Source : As reported to IRDAI, FY 20-21)

Sum Assured

₹1,087,987 Cr.

₹1,087,987 Cr.

In force (individual) (Source : Max Life Public disclosure, FY 20-21)

Assets Under Management

₹90,407 Cr.

₹90,407 Cr.

(Source : Max Life Public disclosure, FY 20-21)

More reasons why our customers choose us

Let’s Connect

Let’s Connect

Online Sales Helpline
0124 648 8900
 (09:00 AM to 09:00 PM Monday to Saturday)

service.helpdesk@maxlifeinsurance.com
SMS 'LIFE' to 5616188

Let us call you back
Customer Service Helpline
1860 120 5577
(9:00 AM to 6:00 PM Monday to Saturday)
  Chat with us

Please write to us incase of any escalation/feedback/queries.

Write to us
NRI Helpdesk
011-71025900; 011-61329950
(9:00 AM to 6:00 PM Monday to Saturday)

nri.helpdesk@maxlifeinsurance.com