A better way to save tax:

Following are some major investment avenues that offer tax benefits and should form a part of your tax-planning portfolio.

1. Public Provident Fund (PPF)   Eligibility : Any individual who has invested in PPF   Investment amount : The minimum and maximum investment amounts are Rs. 500 and Rs. 70,000 p.a. respectively   Returns & Tenure : Public Provident Fund (PPF) is an assured return scheme which is compounded @ 8% annually (i.e. it offers guaranteed returns) and that runs over a 15 year period   Deductions : Investments in PPF are eligible for Section 80C deductions. Also the interest income from PPF is tax-free You can make smaller contributions to the PPF account. The same will help you build a risk-free corpus for the future. 2. National Savings Certificate (NSC) Investment amount : The minimum investment amount is Rs. 100, while there is no upper limit for investing in NSC   Returns & Tenure : National Savings Certificate (NSC) is another assured return scheme of 8% which is compounded half yearly. An investor is required to make a lumpsum investment that matures after 6 years   Deductions : The interest income from NSC is paid on maturity; the same is taxable. Interest accrued on NSC is considered to be reinvested; hence, it is eligible for reinvestment under Section 80C 3. Equity Linked Savings Scheme (ELSS) Eligibility : Any individual who has invested in an ELSS   Investment amount : The minimum investment amount is Rs. 500, while there is no upper limit for investing in ELSS   Return & Tenure : No fixed returns as money is invested in equities. There is a 3-year lock-in period   Deductions : Investments in ELSS are eligible for Section 80C deductions. Also, the interest income from ELSS is tax-free except for STT it is payable 4. Life Insurance/Term plans/ ULIPs   Eligibility : Any individual who has invested in Life insurance/Term plans/ ULIPs   Investment amount : It varies with different plans   Return & Tenure : For ULIPS, no fixed returns; it depends upon the performance of the scheme and the lock-in period is  3 years   Deductions : The amount you withdraw is tax free 5. Employee Provident Fund (EPF)   Eligibility : It is available only for salaried employees   Investment amount : The employee is free to increase his/her contribution but the employer need not increase this beyond the mandatory 12% of the basic salary   Return & Tenure : The rate of return is 9.5% p.a.   Deductions : Investments in EPF are eligible for deductions under Sec 80C. The amount you withdraw is tax free 6. Tax-saving fixed deposits   Eligibility : Any individual who has invested in a Tax-saving fixed deposits   Investment amount : The minimum and maximum investment amounts are Rs. 100 and Rs. 1,00,000 p.a. respectively   Return & Tenure : At present most banks offer a rate of return in the range of 8-8.5% & an additional 0.5% is offered to senior citizens. Tax-saving fixed deposits have a 5-year investment tenure   Deductions : Investments in tax-saving FDs are eligible for deductions under Sec 80C. The interest income from tax-saving fixed deposits is chargeable to tax and subject to TDS (tax deduction at source) Tax-saving fixed deposits can be utilised like NSC, to meet future needs that will arise over a predictable period. 7.  Senior Citizen Saving Scheme Eligibility : Any individual who has invested in a Senior Citizen Saving Scheme   Investment amount : The minimum and maximum investment amounts are Rs. 1,000 and Rs. 15,00,000 p.a. respectively   Return & Tenure : At present most banks offer a rate of return in the range of 9.5% payable quarterly. Tax-saving fixed deposits have 3 - 5 year investment tenure   Deductions : Investments in SCSS are eligible for Sec 80C deductions. The amount you withdraw is tax free 8. Investment bonds   Investment amount : The investment should not exceed Rs. 1,00,000   Return & Tenure : These are issued by infrastructure companies at different rates of interest for a period of 3-5 years   Deductions : Investments in bond are eligible for Sec 80C deductions. The principal amount and the interest earned are both tax-free 9. Health Insurance   Eligibility : Insurance for the health of the assessee, or spouse, or [dependent] parents or dependent children   Investment amount : Maximum Rs.15,000 (Rs. 20,000 in case any person insured is a senior citizen) This deduction under Section 80D is over and above the deduction of Rs. 1 lakh under Section 80C. 10. Home Loan   Eligibility : Any individual who has availed for home loan   Deductions : The principal amount & the interest paid are both tax-free Under section 24(b), for interest paid the maximum deduction permissible in a financial year for the original loan (if any) plus for any additional loans taken is Rs. 1,50,000.

In addition to the above, principal repayment of the loan/capital borrowed is eligible for deduction of upto Rs. 1,00,000 (in a financial year) under Section 80C

Deductions:

Section 80C

Investments upto Rs.1 lakh are eligible for exemption under this section. Investments in NSC, PPF, FD with scheduled banks and Life Insurance are some of the options available under this section.

Section 80D

Under this section, medical insurance premiums of upto Rs.15,000 and upto Rs. 20,000 (for senior citizens) are eligible for deduction.

Section 10D

Any sum received under a life insurance policy, including the sum allocated by way of bonus on such a policy is exempt from tax. (certain exceptions apply in special cases)

Section 24(b)

Interest upto Rs.1.5 lakh per year paid on a housing loan is eligible for deduction under this section.

Section 80G

Under this, contributions/donations made to specified organisations and/or charities are eligible for deduction (50% or 100% depending on specific cases)

Section 80E

Under this section, interest paid on an education loan is eligible for deduction and can be availed for a maximum of 8 years.