Corrections and clarifications on yesterday’s post about tax free and tax saving instruments

by Manshu on April 2, 2013

in Tax

I got a few great comments and emails on yesterday’s post about tax free and tax saving instruments, and although I have made those changes in the post, I think they merit a post of their own. So in this post I’m going to write about some corrections, clarifications and inclusions that various readers suggested.


Income limit to avail RGESS benefit increased to Rs. 12 lakhs: Ashish Pandey wrote in pointing out that while the income limit to claim RGESS tax benefit was Rs. 10 lakh earlier, it has now been increased to Rs. 12 lakhs.

Post Office Monthly Income Scheme is not covered under 80C: Paresh pointed out that Post Office MIS is not covered u/s 80C. I have removed that from the list.

I apologize for these errors.


NPS: Sanmay pointed out that it will be more helpful to the readers if it were clarified that the NPS deduction was on your basic plus dearness allowance, actually over and above the limit of 80C, and was applicable to the amount contributed by the employers. To further explain, to calculate the upper limit on the deduction you should consider not only the basic salary, but the dearness allowance as well.

The money to be considered here is just the employer’s contribution to NPS, and that’s not limited by the Rs. 1 lakh upper limit of Section 80C.


Section 80TTA – Deduction on Savings Account: Krishna pointed out that a new section – 80TTA has been added since last year that makes interest on savings account deductible up to Rs. 10,000. This is only applicable for savings accounts and can’t be used for interest from fixed deposits. Sanmay added that you have to proactively get this deduction and get the bank to not deduct TDS on your interest.

Liquid Funds as Opposed to Savings Bank Account: Tushar brought this up and I am not sure if this will strictly qualify as a tax arbitrage option or not, but regardless, it is a useful thing to keep in mind, and in the existing high interest rate environment they become a viable alternate to savings account in some cases. Vidya Bala has a detailed post on liquid funds that I found quite instructive.

{ 3 comments… read them below or add one }

shekar April 2, 2013 at 11:49 pm


have a doubt, will ELSS funds be eligible for tax savings for FY 2013-14, there was a lot of speculation on its exclusion post DTC, hence asking the status as on today so that investors can continue their SIP’s in them.

thanks and regds



Manshu April 3, 2013 at 12:29 am

yes Shekhar they will be eligible. DTC never got implemented so there is at least another year for you to invest in ELSS funds and get the tax benefit.


ARUN BATRA April 3, 2013 at 6:46 pm

Section 80TTA – Regarding ‘proactive’ prevention of TDS on interest, kindly be informed that the banks do not deduct TDS on savings bank interest.


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