Your Ideal Tax-Saving Plan

The most rewarding ready-to-go tax-saving plans to suit the needs of different investors

- Aakar Rastogi

We are heading into the most action-packed few weeks for tax-saving investments. And while there are plenty of options to choose from, most investors do not have the time or the inclination to evaluate them thoughtfully. For many investors, saving tax itself is the main objective, and the eligibility for tax deduction under Section 80C is the sole feature that gets their nod in the last-minute rush.

Clearly, that's not the right way to invest. Investments made to save taxes have big implications for the personal finances of a majority of investors, given that one puts Rs 1.5 lakh at stake each year. This would become bigger if and when the tax-saving limit is enhanced.

If you are unable to find your way through the maze of tax-saving alternatives, our cover story is for you. We present a simple and effective way to sift through the options and narrow them down to the most useful ones depending upon your investing needs.

Before we get into the details, keep in mind that tax-saving is just an added benefit of such investments. Your investments must first align with your investing and liquidity needs as well as your risk appetite. Keeping that as the central idea, you can use the flowchart 'Tax-saving decision-making framework' for some ready-to-go tax saving plans.

Senior citizens above 60 get tax exemption for up to Rs 50,000 interest earned in a financial year. So, up to Rs 36.75 lakh invested in the SCSS will earn tax-free interest.

The flowchart takes into account your investment needs, risk appetite, and liquidity requirements. It will help you zero in on the most suitable investment. Use it to make a quick decision, though there is also a detailed table 'Tax-saving investments under Section 80C' that compares these and other popular alternatives across important parameters.

Here are a few points to note.