We have reached the final quarter of the current financial year and it is not surprising that there is a frantic rush among common people, both salaried and non-salaried professionals, to scout for favourable tax-savings avenues to reduce their tax burden. Although tax planning should ideally be a year-long and disciplined or systematic process, the urgency to invest in tax-savings instruments is visible only in the final quarter.

However, there is a need to tread with caution as investments made in a haste or based on hearsay or tips instead of solid research is bound to prove counter-productive as you may end up investing in asset classes which are not aligned with your financial goals.

To put it in a nutshell, Tax Planning is a systematic and legal way of reducing your tax liabilities in a year. It helps you utilise the tax exemptions, deductions, and benefits in the best possible way for minimising your tax burden. However, it should be done in a legal manner.

Tax saving investment options, as mentioned above, are considered by both salaried and non-salaried tax payers. While investing, you firstly need to access the tax benefits and the returns it offers. You can avail a maximum tax deduction of upto Rs. 2 Lakhs when it comes to tax savings and the deductions are available from Sections 80C through to 80U and can be claimed by eligible taxpayers under the Income Tax Act, 1961. There are various other sections under the Income Tax Act, 1961 that can reduce your tax liabilities such as exemptions and tax credits.

Let us discuss all these investment options in greater detail which help to reduce the tax burden on individuals.

1. Life Insurance – tax deduction under section 80C with the premiums you pay on your life insurance policies. The maturity payout is exempt from tax under section 10 (10 D) along with the provisions stated therein. (Risk Profile – Moderate)

2. Provident Funds - You may invest in EPF (Employee’s Provident Fund) or PPF (Public Provident Fund) schemes or both.(Risk Profile – Low)

• EPF - The Employee Provident Fund, or Provident Fund as it is normally referred to, is a retirement benefit scheme that is available to salaried employees. Under this scheme, a stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government
• PPF - The Public Provident Fund has been established by the Central Government. You can voluntarily decide to open one. You need not be a salaried individual - you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.

3. Sukanya Samriddhi Yojana Yojana – This account is intended to help parents fulfill their daughter’s education and marriage expenses. It offers tax free returns and the deposits made under this scheme qualify for tax deduction under section 80C. (Risk Profile – Low)

4. National Pension Scheme – The Finance Act, 2015 inserted a new sub-section (1B) under Section 80CCD of the Income Tax Act to encourage investments in NPS by any individual by allowing an additional deduction of INR 50,000 over and above the INR 1.5 lakhs available under Section 80CCE of the Act. NPS helps you to achieve financial stability during your golden years. The money is invested in Government Bond Funds, Corporate and Equity Funds and the returns are market linked. (Risk Profile – Moderate)

5. National Savings Certificate – NSC is issued by the Indian Postal Service for five and ten year maturity periods. You can avail tax deduction under Section 80C for the investments made during a financial year. (Risk Profile – Low)

6. ELSS – Other than deduction benefits and the lock-in period, an ELSS is quite the same as a diversified equity mutual fund. An ELSS gives you tax deduction benefit of up to ₹1.5 lakh under Section 80C. This is the only pure equity investment vehicle that offers Section 80C deduction benefits.The returns under ELSS investment are market linked and your money is invested in the equity market with an intention to give you the scope for earning higher returns. (Risk Profile – High)

7. POSCSS –The Senior Citizens Savings Scheme (SCSS) is primarily for the senior citizens of India. The scheme offers a regular stream of income with the highest degree of safety and tax saving benefits. It is an apappropriate choice of investment for those over 60 years of age. The tenure of this scheme is 5 years with the option to extend it for a further 3 years.(Risk Profile – Low)

Other investments include Bank fixed deposits, Post office time deposits, home loans and tuition fees for children. Though there are various options available for all types of risk portfolios, Tax Saving Mutual Funds, better known as Equity Linked Saving Schemes, are considered as one of the most efficient ways to save tax as well as earn high returns on your investment over a period of time. Any person who is planning to save tax should have a look at this option. Here you will save tax upto Rs. 1,50,000 & at the same time, you will get an exposure to Mutual funds and therefore a scope for earning inflation-beating returns. However, do not ignore your risk profile while picking up a scheme in your last-minute rush. Investors should ideally check the investment strategy of the fund and then select the appropriate ELSS as per his/her risk profile. If the investor is not comfortable with market risks or volatility, he / she could look at conservative and safe instruments such as the PPF.

To conclude, every investor has a specific need depending upon his financial goals and therefore needs to undertake the tax planning exercise with absolute discipline to ensure that taxes do not eat into the final returns by prudently claiming the various exemptions available as per law. Plan your taxes wisely by choosing the right instruments for investment which are sufficiently aligned with your financial goals and your risk-bearing tolerance.

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.