Does it feel like the clock is ticking on your investments for the year? With less than three months to go, it’s time to finalise your tax-saving investments for the year and optimise your deductions under various sections of the Income Tax Act. If you’ve been working on a financial plan, now is the time to evaluate where you stand and what needs work. If you haven’t worked out a financial plan, you have little time left to address your tax-saving needs.

But first…

Before you get down to actual investing, be clear about where you stand. Compute how much tax you need to pay for the year. Use a good online income tax calculator for this. Look at all your income sources, from salary to interest from FDs, to rental income and capital gains from stocks and mutual funds.

Your taxable income is your total income from all these sources, minus the deductions you are eligible for, such as the standard deduction for Rs 40,000. You pay no tax if your taxable income is Rs 5 lakh or less.

Next, make a list of all the investments and tax-saving measures already taken. For example, rent paid and your children’s school fees also earn tax deductions. After this, you’ll have a clear picture of how much more you need to invest over the next three months to get the maximum tax rebate possible. And then, we come to tax-saving options — and thankfully, these you can invest in without getting up from your couch.

ELSS option

Equity-linked savings scheme (ELSS) is one of the best ways to save tax under Section 80C. These are diversified equity mutual fund schemes and have the lowest lock-in period compared with other investments allowed under Section 80C such as PPF, NSC and POMIS.

Moreover, the potential returns from ELSS are higher, with top-performing ELSS funds providing three-year returns in the range of 12-15 per cent compared with the approximately 8 per cent offered by most small savings schemes.

You can purchase ELSS funds online using a KYC-compliant bank account. You also have the option of buying them in lumpsum or in monthly instalments via a monthly systematic investment plan.

The latter also means that your investments can continue in the coming months, reducing the pressure on your future financial planning.

Do bear in mind that ELSS plans are riskier products as they invest in the stock markets, and past returns do not guarantee future returns, as your money is being invested in a volatile asset class. That said, if invested wisely, they can provide you excellent returns. If you are unsure about which ELSS fund to buy, or which fund house to pick, consult an investment adviser and read up about the risks.

Health insurance

As you save, the other thing on your mind should be protection. No matter what your age or income, health insurance is a must-have. It is your first line of defence against steep medical expenses. Even a minor hospitalisation can set you back by a good amount and a major illness can cost you more than a few lakh. You have multiple options to choose from for yourself as well as your entire family.

Under Section 80D, you also claim deductions on health insurance premium of up to Rs 25,000 for yourself, your spouse, and dependant children (or Rs 50,000 if you are over the age of 60).

You can claim an additional deduction of up to Rs 25,000 for insuring your parents if they are under 60, or Rs 50,000 if they are over 60. Best of all, you can buy these policies online easily. If you don’t have a health insurance, this is the best time to go for it. Make sure you have a cover of at least Rs 5 lakh. If you already have health insurance, you can increase the coverage.

Term insurance

Any person with dependants and financial liabilities should own term insurance. If you are in the market for your first life insurance policy, do consider owning a term insurance plan, which is a pure life cover with no investment benefit. And because there is no maturity value or investment benefit, term plans are easy on your pocket.

A 30-year-old can avail herself of a life cover with a sum assured of Rs 50 lakh with premium starting from around Rs 4,200. Again, this policy can be bought online through the websites of insurance companies, and the policy will be delivered in a few days to your home.

You can also add riders such as critical illness benefit, or accidental death benefit, which will improve the ambit of your coverage.

National pension scheme

Retirement planning needs to be a part of every investment plan. The National Pension Scheme is essentially a pension plan where you invest in an online account at regular intervals. It not only provides a retirement planning solution but also gives you additional tax breaks through a tier-1 account.

The money you invest, the capital gains earned as well as the final gains are tax-exempt. The money you put in is invested in the market in a mix of equity and debt instruments. You can calibrate your pension fund between equity, government debt and corporate debt according to your risk appetite and age.

On retirement, you can withdraw up to 60 per cent of the corpus, tax-free. The rest will have to be used to purchase an annuity plan that will pay you a monthly pension. NPS investments up to Rs 50,000 get additional tax rebate under section 80CCD. You can open an NPS account online in less than half an hour and generate a Permanent Retirement Account Number.

Spread out all these investments over the next three months so that you are not over-burdened. In the next financial year, do make it a point to plan your taxes ahead.

The writer is CEO of `BankBazaar.com`