Mythbuster

Thus if your tax liability is Rs 15,000, all you need to do is invest Rs 1 lakh in specified investments (such as Public Provident Fund, National Savings Certificate, and infrastructure bonds of financial institutions) and you need not pay any tax. Sounds simple, but you’ll need to put in a little thought to decide the best investment for you.

Deductions are reduced from your income and not your tax liability. There are various deductions to which you are entitled. For instance, you can deduct up to Rs 12,000 from your interest income from specified securities and up to Rs 10,000 on payment to pension plans of approved insurers.