Here are a few investment options that offer tax benefits;

The government extended the tax-saving exercise for FY2019-20, until June 30, 2020, from the earlier deadline March 31, 2020. This gave the taxpayers extra time to complete their tax-saving investments for FY2019-20. Having said that amidst the COVID-19 pandemic, there are taxpayers who have not yet invested in the necessary financial products to save tax. If you are one of them who still haven’t zeroed in on a financial product to invest in to reduce your tax outgo for this year, here are some options for you.

Here are a few investment options that offer tax benefits;

Insurance
Life insurance comes first while investing in tax-saving instruments, especially if you have financial dependents. Keeping it simple, buy a term plan with an adequate insurance cover. Opting for a term insurance plan will not only come with a low premium, but your payment outgo will also be eligible for tax benefit under Section 80C. Experts suggest not to opt for endowment plans or ULIPs. Even though these provide twin benefits of insurance and investment, they neither serve as a good investment nor provide adequate life insurance coverage.

Create wealth while saving tax
Don’t just invest randomly only to save taxes. Consider your investments a way to achieve your long-term goals, for instance, accumulation for your retirement, paying for your child’s higher education, etc. Alternatively, Equity-linked savings schemes (ELSS) and the National pension scheme (NPS) also help in creating long-term wealth. Even though equities are volatile in nature and are a risky bet over the short-term, they tend to give superior inflation-adjusted returns in the long term.

ELSS happens to have the shortest lock-in period (3-years) among all tax-saving alternatives and should be the mainstay of your tax-saving investments. They offer great long-term return potential.

Even though NPS is a viable option for wealth creation, it locks the money of an investor until he/she reaches the age of 60. There are partial withdrawals with NPS, but only under specific circumstances. However, with NPS one can avail of an additional deduction of up to Rs 50,000 over and above the Rs 1.5 lakh limit under Section 80C.

Additionally, even though PPF is a popular tax-saving instrument, it comes with a lockin period of 15-year.

Look at other alternatives
If you are not satisfied with ELSS, PPF, and NPS for your tax-saving requirements, you can look at NSC. Among fixed-deposit kind of investment with a shorter maturity period, National Savings Certificate (NSC) is ideal. It is known to offer better returns along with a sovereign guarantee.