FY20-21 nearing end; take a look at some tax-saving investment options

According to Adhil Shetty, CEO, Bankbazaar.com, data shows that of the 14 ELSS schemes that have existed in the last 20 years, 13 have delivered average returns of at least 13 percent per annum.

With a three-year lock-in, Shetty says that ELSS funds also have the shortest lock-ins among tax-saving investments. While one can invest in ELSS funds lump-sum or in monthly SIPs, the SIP route is always more advisable for the long term.

For risk-averse investors who’re not prepared to venture into the volatile financial markets but want to invest for the long-term, Shetty says that provident fund investment should be the way to go.

“In the office-provided Employee’s Provident Fund (EPF) scheme, one could top up the own contribution to up to 100 percent of the basic pay,” he suggests.

The EPF currently offers guaranteed returns of 8.50 percent per annum – higher than any other similar debt investment scheme, and also tax-free on retirement so long as the annual contribution does not exceed Rs 2.5 lakh.

If an individual doesn’t have an EPF account, Shetty further tells that he/she has the option of investing in the Public Provident Fund (PPF). PPF currently returns 7.1 percent per annum, risk-free, tax-free.

Contributions to both EPF and PPF are tax-exempt under 80C.

However, Shetty asks investors to be aware of the flipside.

"Both schemes are long-term ones and therefore not liquid," he warns.

Apart from 80C, investing in health insurance gives financial protection against medical emergencies, and, at the same time, helps in saving tax under Section 80D.

According to Shetty, investors can claim deductions for two different policies: one for themselves, spouse, and dependent children; another for dependent parents. For each group, the maximum deduction that can be claimed is Rs 30,000 if the policy participants are under 60; or up to Rs 50,000 if they’re over 60.