How to Save Maximum Income Tax? Tax Saving Options above One Lakh Limit - Part I

You can save considerable amount of tax if you plan your investments early in the financial year.

As per income tax act under section 80C, individuals can invest up to Rs 1,00,000 in various tax savings schemes and thus save a maximum of Rs 30,300(depends on your tax slab). Best part is, most of us are not aware of other income tax sections to save tax above this one Lakh limit!

Before proceeding with how to save maximum income tax, let us take a look at the tax slabs for the financial year 2011-2012:

Click here for the tax slabs for the financial year 2013-2014.

Income tax slabs - General Category for the FY 2011-2012

Income tax slab	Tax
0 to 1,80,000	No tax
1,80,001 to 5,00,000	10 percentage
5,00,001 to 8,00,000	20 percentage
Above 8,00,000	30 percentage

Income tax slabs - Women for the FY 2011-2012

Income tax slab (in Rs.)	Tax
0 to 1,90,000	No tax
1,90,001 to 5,00,000	10 percentage
5,00,001 to 8,00,000	20 percentage
Above 8,00,000	30 percentage

Income tax slabs - Senior citizen(60 to 80) for the FY 2011-2012

Income tax slab (in Rs.)	Tax
0 to 2,50,000	No tax
2,50,001 to 5,00,000	10 percentage
5,00,001 to 8,00,000	20 percentage
Above 8,00,000	30 percentage

Income tax slabs - Very Senior citizen for the FY 2011-2012

Income tax slab (in Rs.)	Tax
0 to 5,00,000	0 percentage
5,00,001 to 8,00,000	20 percentage
Above 8,00,000	30 percentage

Now let us go through various sections in India Income Tax Rules to find out how we can save maximum tax. Assuming you are under general category and falls in the upper tax slab, i.e, 30%:

House Rent for HRA exemption u/s 10(13A) of Income Tax Act, 1961

Proof of Rent Paid should give detail of:

• Name and address of landlord
• Period for which rent paid & amount (monthly rent )
• Address of rented premises for which rent paid
• Signature of landlord
• Name of employee
• Revenue stamp on Rent receipt is mandatory if amount is above 5,000/-.*
• PAN of the landlord / Declaration from landlord incase the monthly rent exceeds 15000/-

* Note :- Affixing of revenue stamp is not required in the city of Bangalore.

Section 80EE - Declare Additional Rs. 1Lakh

Section 80C

• Public Provident Fund (PPF)
• Provident Fund (PF)
• Life Insurance Premium - Benefit can be given for 1) yourself, 2) spouse, and child (married / unmarried, dependent / not dependent). Premium paid on exceeding 20% of sum assured is not eligible for deduction. Also, no deduction is available if the duration of the policy is less than 5 years.
• Equity Linked Saving Schemes - ELSS
• Unit Linked Insurance Plan - ULIP
• Bank Fixed deposits or Term deposits for more than 5 years - You need to submit a copy of FDR certificate which states the period of investment, amount invested, and name of the person who has taken fixed deposit.
• Principal part of EMI on Housing Loan - You can save up to Rs. 1 Lakh each year irrespective of your tax bracket, only if the property is for your own use. Other than self-occupied, if the property is in a different city than where you reside currently, you can rent it out. It includes principal amount of housing loan re-paid and expenses incurred for transfer of title of house property such as registration charges, stamp duty, brokerage etc provided the same are paid in the current financial year. Deduction is allowed on the basis of re-payment certificate provided by the bank / financial institution / person to whom loan is re-paid.
• Tuition Fees - Deduction of tuition fees paid during the current financial year is allowed for maximum two children. Also, benefit is available only for tuition fee component of the total fee and not of other constituents like Building fund, Bus fee etc. Copy of current year receipt from university / Collage / School / other education institute situated in India will be considered. In addition, it should have been paid for a full education. Play School fee is considered only if registered with a recognized Board or University.
• National Saving Certificate - only in your name
• Interest accrued on NSC - Interest on NSCs which has been purchased in earlier years and which is being re-invested qualifies for benefit. Submit copy of NSCs of earlier years not earlier than the year 2005.
• Stamp duty and registration charges paid while buying a new home
• Any contribution to an approved superannuation fund
• Bonds - issued by national bank of agriculture and rural development.
• Tax saving Mutual funds - Considered only if its in your name
• Senior citizens Saving Scheme
• Post office Time Deposit

Go to Tax Saving Above One Lakh Limit - Part II

Part II of this article explains various tax saving options above One Lakh limit.