GST Plus - Get Daily updates,support, whatsapp Group & reply to GST Notices etc.!! Call : 011-411-70713 !!


Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Income Tax Reliefs To Remove Future Worries


There are certain provisions of Income Tax Act which are framed to encourage savings amongst individuals. The method adopted to encourage such savings is by giving income tax relief to individual on investment in certain categories of instruments. A person investment his money on such instruments get ride of his future worries on the one part, and gets discount on his tax liabilities on the other part. Some of the tax savings tools are as follows:











Mutual Fund:

Sec10(35) of the Income Tax Act provides that any income received by investor under the scheme of any mutual fund is exempt from income tax in the hand of the recipient unit holder. Again Sec 194K & 196A of the act provides that no TDS should be deducted by mutual fund on payment or credit of income.


Where the investor are holding units of more than twelve months preceding the date of transfer (Long Term Capital) then the proceeds from sale of such units are fully exempt from tax provided STT is charged.



Provident fund is the most effective investment cum tax savings tool. Different types of provident fund provide different tax benefits, which are as follows:

v  Recognised Provident Fund: This scheme is applicable to an organization which employs 20 or more employees. An organization can also voluntarily opt for this scheme. Contributions made by employee in this scheme are allowable deduction under section 80C subject to maximum limit. Employer’s contribution up to 12% of salary is exempted. Any excess contribution above 12% by the employer is  in gross salary. Interest earned upto 9.5% per annum on such scheme is exempted. Withdraw from such fund on retirement/resignation/termination is exempted u/s 10(12) subject to certain condition.


v  Statutory Provident Fund: This Fund is mainly meant for Government, University, Educational Institutes (affiliated to university) employees. Contribution made by employees in this fund is allowed as deduction under section 80C subject to maximum limit. Employer’s contribution in this fund and the interest earned on such scheme is fully exempted. Again withdrawal from such fund on retirement, resignation or termination is fully exempted under section 10(11).


Public Provident Fund: This is a scheme framed under Public Provident Fund Act 1968. In this scheme even self-employed persons can make a contribution. The minimum contribution is Rs.500 per annum and the maximum contribution is Rs.70000 per annum. The contribution made by investor in this scheme is allowed as deduction u/s 80C subject to maximum limit. Interest earned thereon is fully exempt. Any withdrawal from fund does not attract any tax liability.


Life Insurance:

Life insurance is a wonderful tax-saving tool. Life Insurance premia paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof, provided premium paid is not in excess of 20% of capital sum assured then the whole premia is allowed as deduction under section 80C, subject to maximum limit.

As per 10(10D) of the Income-tax Act, 1961, Maturity/Death claims proceeds of life insurance policy, including the sum allocated by way of bonus on such policy is exempted from income-tax subject to certain condition.

National Savings Certificate (NSC):

National Savings Certificate is a six year small savings instrument eligible for section 80C tax benefit. The interest accrued every year is liable to tax i.e., to be included in your taxable income, but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.


Infrastructure Bonds:


These bonds are issued by infrastructure companies, and not the government. The amount that you invest in these bonds is eligible for deduction under section 80C.


Unit linked Insurance Plan :


ULIPs cover Life insurance with benefits of equity investments. Investment made under this scheme is eligible for deduction under section 80C subject to maximum limit. They have attracted the attention of investors and tax-savers not only because they help us save tax but they also perform well to give decent returns in the long-term.

Equity Linked Savings Scheme (ELSS):

There are some mutual fund schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme. The investments that you make in ELSS are eligible for deduction under Sec 80C.Shuffling is a popular strategy used by ELSS investors which have a mandatory lock-in of 3 years. If you have been investing Rs 50,000 for the past few years and don't have cash to invest this year, you can easily redeem investments made 3 years ago and re-invest that amount this year to claim the benefits. You will not have to pay any long term capital gains since you will be redeeming after more than a year. Thus you can enjoy tax benefits without making any fresh investments. Only risk is that the NAV can go up or down in the shuffle process and you may end up making a small profit or loss.


So while investing any money for the well being of your future, attention should be given toward tax benefits available from such investment. Thus along with securing future you will be saving tax simultaneously. And by this you will be helping income tax department to achieve their objective as to routing the income of person and encourage savings. Saving done accordingly are mobilized by the financial system to various development sectors which further helps in the growth of your economy. So by portioning your income towards such savings instruments you are benefiting yourself on the one part as well as indirectly helping your economy to grow at a faster pace. So it’s better to save your money in such a way such that your economy is also saved.



"Loved reading this piece by Rahul Poddar?
Join CAclubindia's network for Daily Articles, News Updates, Forum Threads, Judgments, Courses for CA/CS/CMA, Professional Courses and MUCH MORE!"

Category Income Tax, Other Articles by - Rahul Poddar