How much should I invest in PPF account to save Rupees 15000 income tax?

Question

For ex:
My net/total Taxable Income, after all deductions, for the Financial Year 2016-17 is Rs 4,00,000 (4 Lakh Rupees). I am a salaried person.

As per current tax brackets upto 2.5 lakh, there is NIL tax. So, my taxable income left is 400000-250000 = Rupees 1,50,000 (1.5 Lacs). This amount is taxed at 10% bracket, so now my income tax is Rs 15,000.

I have not done any extra saving. If want to open a PPF Account, then how much should I invest in PPF, so that I can save full RS 15000 tax.

I have declared in investment declaration form to my company that I will invest Rs 1.5 lac in declaration form. Does this matter?

Is it that to save just Rs 15,000 tax I have to put 10 times, 1.5 lacs in PPF account or I can just invest Rs 20000 - 30000 to save full tax.

Is their some ratio 1:2 or 1:3; i.e. to save Rs 1000 I have to invest 2 times or 3 times. Please help. I'm confused.

Thank you so much for your answer!

Answer 1

I have not done any extra saving. If want to open a PPF Account, then how much should I invest in PPF, so that I can save full RS 15000 tax.

You will have to invest Rs 1,50,000 in PPF [or any other instrument described in 80C on Income Tax] to save the Rs 15,000 in taxes.

I have declared in investment declaration form to my company that I will invest Rs 1.5 lac in declaration form. Does this matter?

Generally NO. Whatever is declared initially is used to deduct appropriate taxes. Hence if you declare more and invest less, more tax gets deducted in Jan-Mar and could be cash flow issue. If you declare less and invest more; less tax gets deducted in Jan-Mar.

Is it that to save just Rs 15,000 tax I have to put 10 times, 1.5 lacs in PPF account or I can just invest Rs 20000 - 30000 to save full tax.

Is their some ratio 1:2 or 1:3; i.e. to save Rs 1000 I have to invest 2 times or 3 times. Please help. I'm confused.

The 80C works as deductible from your taxable income. So if you invest Rs 1,50,000 in PPF you taxable income is reduced by that amount. So if you are in 10% bracket, to save max of Rs 15,000/- you need to invest Rs 1,50,000. Like wise if you are in 30% tax bracket, to save max of Rs 45,000/- you need to invest Rs 1,50,000.