Article discusses Rate of Interest, Limit of Investment and Income Tax Benefit from Investment in 8 Most Popular Tax Saving Instruments in India i.e.  1,2,3 and 5 year Time Deposit, 5 Year National Savings Certificates VIII Issue (NSC), 5 Year Post office Recurring Deposit(RD), 15 year Public Provident Fund (PPF), Post office Saving  Bank Account, 7 years Saving Bonds, 5 year Senior Citizen Savings Scheme, Sukanya Samriddhi Account. Tax benefit may be in the form of deduction U/s. 80C or Exemption of Interest from Tax.

Pour Your Taxes into your Investment- Tax Saving

Tax Saving Schemes Available for Assessment Year 2020-21 under Income Tax:

Serial No. Tax Saving Schemes Rate of Interest Limit of Investment Exemption under Income Tax
1. 1,2,3 and 5 year Time Deposit
  • Interest @ 6.9%, 6.9%, 6.9% and 7.7% per annum (Calculated at quarterly compounding basis)
  • Minimum Amount-Rs. 100
  • No Maximum Deposit Limit
  • Minor can also open the time deposit.
  • Interest is chargeable to tax.
  • Investment in 5 year time deposit scheme will qualify for deduction under 80C
2. 5 Year National Savings Certificates VIII Issue(NSC)
  • Interest @ 7.6% per annum, Compound yearly
  • Payable on Maturity
  • Minimum Amount-Rs. 1000
  • No limit on maximum deposit.

 

  • Interest is chargeable to tax on accrual basis.
  • Investment and interest accrued  in first 4 year will qualify for deduction under 80C
3. 5 Year Post office Recurring Deposit(RD)
  • Interest @ 7.2% per annum, compounded quarterly
  • Payable on Maturity.
  • Minimum Amount-Rs. 100 per month or any amount in multiples of Rs 10
  • Interest is chargeable to tax.
4. 15 year Public Provident Fund(PPF)
  • Interest 7.9% per annum(Compounding annual basis)
  • Payable on Maturity.
  • Minimum Amount-Rs. 500
  • Maximum- Rs. 1,50,000 in every financial year
  • Interest is total exempt under section 10.
  • Investment will qualify for deduction under 80C

 

5. Post office Saving  Bank Account Interest @ 4% per annum.
  • Minimum Amount-Rs. 500
  • Under Section 80TTA, interest income earned from Post Office Savings Account up to Rs. 10,000 is tax deductible and under section 80TTB in case of senior citizens amount upto Rs 50,000 will be tax deductible
6. 7 years Saving Bonds
  • 7.75% Interest
  • Payable Half yearly and compounded in rest half yearly.
  • No Minimum and Maximum Limit.
  • Interest is chargeable to tax.
7. 5 year Senior Citizen Savings Scheme
  • Interest @ 8.6% per annum payable quarterly.
  • Maximum- Rs. 15 Lakh
  • Interest is chargeable to tax.
  • Investment will qualify for deduction under 80C
8. Sukanya Samriddhi Account Interest @ 8.4% per annum, compounded yearly.
  • Minimum Amount-Rs. 250
  • Maximum- Rs. 1,50,000 in every financial year
  • Interest is total exempt under section 10.
  • Investment will qualify for deduction under 80C

Rahul Grover – info@raagconsultants.com

(Republished with Amendment)

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