Hi.
Jetta's ICE from the factory is really poor for the price. If you plan to keep it for 3+ years, consider those options first which will keep your warranty intact (enquire from VW dealer) and opt for extended warranty as VWs are pretty expensive in spare parts pricing and Jetta is itself a complicated car. Since you have the money, going for a lesser powerful setup will be better if it keeps your warranty intact.
Any way, set aside 20k from the 1.3 Lac for damping, water guard spacers, labour, couplers, MDF boards, connectors and other small bits and pieces. You need front 6.5" components (2 way) and 6.5" rear fills, a 4 channel amplifier and a subwoofer (12") with a mono amplifier for it. For rear fills, you can opt for components at the rear if you are looking for more clarity as coaxials at the back would give a muddy sound with overpowering bass at the rear seat. Since you have the budget, go for components (6.5") at the rear also.
You can divide the budget (1 Lac net after setting aside 10k for wiring) as follows :
6.5" Components (2) - 30 to 35k
Subwoofer - 13 to 17k
Mono Amplifier - 15 to 20k
4 Channel Amplifier - 15 to 20k
LOC - 6 to 8k
Total comes at around Rs. 1 Lac. Now read below for the options -
LOC : If you are looking at a basic setup, a converter (active/passive) from a good brand like Scosche, JBL or Audison would do.
Wiring : Scosche RCAs are good, but since you have the budget, you can opt for a complete kit from Focal, Scosche, Ground Zero or Kicker. Ensure that they are original.
Subwoofer : If you are looking for a total SQ subwoofer, then Hertz and Rockford Fosgate are good but won't be much powerful as they sound sweet (RF) and a bit muffled (Hertz). You can go for Infinity 120.9w if you want slightly louder SQL type sound, obviously provided that you use a ported box. For a sealed use, Infinity 120.9w is pretty much SQ oriented and blends well with sedans also. Polk Audio has a good punch if you are looking for hard hitting bass in large sealed enclosures. I am having MM series DVC (1240DVC) from Polk which sounds perfect in a sealed box. P2D4 from RF is also good but it lacked a more agressive output. You have many options like Focal, Ground Zero, Infinity, Image Dynamics, Hertz, Kicker, Morel and RF.
Amplifier Mono : You can have a powerful Pioneer amplifier with 800w RMS at 2 Ohm (stable upto 1 Ohm) in the budget. There is a lesser powerful (500w RMS) from Pioneer for 14k, if your subwoofer doesn't demand much. Focal Solid 1 is a good option (with bass control knob) and gives out 470w RMS IIRC and will cost around 15k. Gladen RC series is also good and would cost around 15k for 560w RMS amplifier.
Speakers : This you will have to hear and decide as you are spending the big bucks. Hertz Energy series, Polk, RF Punch and Morel, Infinity, Rainbow and Flux audio are also good. A good ICE shop will let you audition these brands and then let you decide.
Amplifier 4 Channel : You can decide on Polk 660.4 (slightly more expensive) or Focal Solid 4 or Gladen RC series or even the powerful yet cheap GTO1004 from JBL. Options are endless and you have to decide which brand you prefer and compare the specs with the competitors. Do match the RMS ratings of your amplifier and speakers, so that speakers are able to perform at their best.
Damping : You can go for Noisekill, Dampmat or Dynamat Extreme. Dynamat Lite series aren't effective and Dampmat is a better choice in this case. A bulk pack of 9 sheets, 36 sq. ft., will cost you under 18k (Dynamat Extreme, dampmat and others are cheaper by 4-6k) and will be enough for doors plus boot. Avoid Stinger and other low quality brands like X Scorpion.
My advice would be to opt for a DSP or an Equaliser to tune your music requirements in depth. It is pretty much affordable in your budget and you will have good control over precise functions. Audison Bit 10 is a good choice (and RF360 something also) if you are on budget, else Bit One is very capable. JBL MS8 is discontinued now and you may get discounts on it for old stock. For subwoofer enclosure, get 0.75 inch MDF box made and get a sturdy MDF rack (board) for mounting the amps. If you want tight hard hitting bass, go for a sealed box and if you want low growling but loud bass, go for a ported box. You can even consider putting 2 subwoofers in the boot if you want the setup to be bass-friendly. Also see if your amplifiers have hi-level (speaker level) inputs as this would eliminate the need for a passive/active converter, saving you bucks and lesser chances of audio quality degrading. Get the install done from a professional shop as Jetta is a complicated car with so many systems which the local guys would not be able to handle. And you can prioritise your requirements (of what you prefer - 2 subs? Hard hitting bass? Clear vocals? Muffled bass? Great tuning capability? Where do you sit in the car? Ready to sacrifice some boot space? Preferred brands? Front biased or rear biased setup? More bass or more clarity?) and limit your choices to make a good decision as a budget of 1 Lac plus invites lots of options and ultimately confusion.
I have also installed a setup for 1.05 Lac in my Swift, but it included everything like damping, wiring and all.