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  • Deduction of up to Rs 1 lakh on investments in specified instruments is available.
  • All sectoral caps (except PPF) have been removed.
  • The EET, if implemented, could impact small savings.
  • ELSS provides the best hedge against inflation, besides tax brakes.
  • PPF isn't a strain on the pocket - invest as little as Rs 100 to keep your account alive.
  • Life insurance is fine for risk cover, but is no great shakes as an investment option.

Eligibility for Tax Saving through Investment
  • Only individuals or HUF were eligible.
  • Only those investments, contributions and payments made from the income of the relevant financial year were considered.
  • The income should have been taxable in India.
  • Monetary limits set for each type of investment, contribution, payments had to be adhered.
For individual and HUF, the entitled deduction is up to Rs. 1 lakh for investments, contributions and payments made towards life insurance, housing loans, PPF, infrastructure bonds, etc. There are no other sub-limits, except for PPF. It is restricted to Rs. 70,000.

The Popular Investment Options
  • PPF (with post offices/banks), statutory provdent fund (deducted and paid by the employees).
  • Life insurance premium (with the LIC or other private insurers).
  • Unit-linked insurance (UTI & mutual funds).
  • Equity-linked saving schemes.
  • National Saving Certificates.
  • Infrastructure bonds.
  • Home loans.

Public Provident Fund
  • PPF (with post offices/banks), statutory provdent fund (deducted and paid by the employees).
  • Minimum Limit - Rs. 100
  • Maximum Limit - Rs. 70,000
  • Tenure - Minimum 15 years
  • Investment has to be made every year
It can be opened at any branch of the SBI or its subsidiaries, at any post office or at the branches of specially nominated nationalised banks. The withdrawals are restricted to 50 per cent of the balance standing at the end of the 4th year.

Life Insurance
  • Maximum Limit - Rs. 1 lakh.
  • Premium paid in any year should not exceed 20% of the sum incurred (issued after 1 April 2003).
  • The sum paid in excess of 20% will not be allowed for any deductions.
  • The tax-free status is limited to direct taxes and not to the service tax payable on insurance maturity.

  • It is the combination of investment fund and insurance policy.
  • Minimum Limit - Rs. 15,000 with annual contribution of Rs. 1,000.
  • Maximum Limit - Rs. 2 lakh with annual contribution of Rs. 20,000.
  • Age of the investor - 12 - 55 years 6 months.
  • It is also exempt from wealth tax.
  • Service tax may be charged since insurance cover is taken.

ELSS (Equity Linked Savings Scheme)
  • Maximum Limit - Rs. 1 lakh.
  • It offers investors a window to benefit from the 'power' of equities, with tax benefits as a sweetener.
  • Lock-in period - 3 years.
  • Liquidity option is curtailed.
  • It has risk but the return is maximum, even up to 47%.

National Saving Certificates (NSC)
  • Offers flexibility like PPF.
  • Available at any post office in a denomination as low as Rs. 100.

Infrastructure Bonds
  • Investments are in the form of shares/ debentures/ bonds issues by public financial institutions.
  • There is no opportunity of making a capital gain.
  • These are useful for investment made for long run.
  • Money is returned in a relatively shorter period like 5 years or 3 years.
  • The interest rate is the prevailing interest rate.

Monthly Income Scheme (MIS)
  • 8% of interest.
  • Bonus of 10% on maturity.
  • Minimum Limit - Rs. 1,000
  • Maximum Limit - Rs. 3 lakh (Rs. 6 lakh for joint account).
  • Maturity Period - 6 years
  • Lock-in Period - 3 years
  • Withdrawal before 3 years there is a deduction of 3.5%
  • Withdrawal after 3 years but before 6 years, bonus will not be paid.

Kisan Vikas Patra
  • Money doubles in 8 years and seven months.
  • Available at any post office in denominations of Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs. 50,000.
  • Interest is paid only after maturity.




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