Save Tax

Essentials for Saving Tax

To get the tax benefits under the Income Tax, you need to match them with your specific situation.
80C Investments
Top two 80C investment options

  • First Choice: Equity-linked Savings Scheme for the long-term. If you are a premium subscriber, see our recommendation in ELSS tool
  • Second Choice: Public Provident Fund. If you have not utilised the full amount under 80C, invest the balance amount in PPF in the name of minor child for whom you are guardian. The total investment in PPF for yourself and your minor child should not cross Rs1.5 lakh.
  • If the spouse is not working, invest in PPF in the name of your spouse.
  • If spouse is working, remember a second child can have PPF with your spouse as guardian. The limit of Rs1.5 lakh should be adhered to
  • Senior citizens: Apart from the above options, senior citizens can invest in Senior Citizens Savings Scheme (SSA) available from banks.
Education Costs
Grab the tax benefits on Children's education

School and college fees are also part of the 80C limit which is covered by the certain rules
  • Fees must be for play-school, pre-nursery, nursery class and higher classes, university, college or other educational institution.
  • The following payments are not allowed as a deduction-part-time courses, coaching classes or private tuitions, distance-learning courses, donation to an educational institution, development fees, building fund, late fees, transport charges, hostel charges, mess charges, library fees and scooter/cycle/car-stand charges.
  • Deduction can be claimed in the year it is paid.
  • Deduction can be claimed by an individual but not by HUF (Hindu undivided family)
  • The deduction can be claimed for a maximum of two children. Husband and wife have a separate limit of two children each; this means they can claim deduction for four children in all.
  • The educational institution must be situated in India.
Home Loans
Don't miss the huge tax benefits on home loans

A lot of benefits come to those who have taken home loans.
  • House must be completed by the end of the previous year in which the deduction is claimed.
  • Payment of stamp duty and registration charges will be part of 80C deduction. You can claim it even if you have not taken any home loan. Claim these expenses in the year you incur the expenditure.
  • The tax benefit under Section 80C is available only for purchase or construction of a residential property. Housing loan benefit for more than one house can also be claimed. It is not available on commercial property
  • Unfortunately, unlike the interest component on housing loan, you cannot claim principal repayment of a housing loan during the pre-construction stage in future years.
  • The property must not be sold for five years from the time you take possession. Doing so will add back the deduction to your income in the year you sell.
Health Insurance
Get the Tax Benefit on Health Insurance Premium

  • For Non-senior citizens the limit is Rs25,000, while for senior citizens' limit is Rs30,000.
  • Medical expenses incurred by a person of 80 years or above within the overall limit of Rs30,000.
  • Only the proposer of the policy can avail 80D deductions for the premium paid for health insurance. There can be only one proposer for each policy.
  • If the spouse is working and wants to claim 80D as well, you may consider having separate policies for yourself and your spouse. Children can be on either of the policies (your or your spouse's policy).
  • But you will lose the family discount while trying to split the policies and the premium of two policies can be higher than one, especially if it is family floater.
  • If you wish to cover your parents, have them on a separate policy. If you are the proposer for your parent's policy, you can avail additional 80D deduction. You may become proposer for parents' policy and make your working spouse the proposer of policy which covers you, spouse and children.
  • Apart from mediclaim, super top-up and critical illness products can also be considered for your family coverage.
  • Do not pay the premium in cash. Tax benefit will be denied
Health Checkups
Get the tax writeoffs for health check-ups

  • There is a limit of Rs5,000 paid for preventive health programme (PHP) within the overall deduction of Rs25,000 and Rs30,000.
  • Do you really need it? PHP is often hard-sold. Don't fall for the hardsell for preventive health programme (PHP). Please read this Moneylife cover story "Screening & Diagnostic Tests: Don't Fall for the Sales Push"
  • Keep the bills for such diagnostic tests over the period of year. Payment can be in cash.
  • To take advantage of the unutilised tax-breaks, a few health insurers have come up with plans that have higher premiums, extend cover for outpatient department (OPD) treatment and, in some cases, maternity expenses too. Instead of mediclaim with OPD benefits, you should consider super top-up product to enhance your cover and for utilisation of the 80D limit.

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Changes in Our Business Model
25th Sept 2020
Greetings from Moneylife Advisory Services
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • We will have to suspend the restructuring tool.
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
Debashis Basu