With just few weeks left to the extension granted, it’s essential for every assessee to ensure investments to align with the objective of tax savings. Considering the financial hardship caused due to lockdown, the government had extended the deadline for tax savings to June 30, 2020 for FY2019-20.

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The earlier deadline was March 31, 2020.

There are several ways by which an investor can reduce the income tax liabilities and save more. According to tax experts, investors can consider instruments that earn deductions under Section 80C and Section 80D.

(Also read:

5 mistakes investors make while planning tax savings and how to avoid them)

Here are the tax-saving investment options:

For fixed return, a person can opt for instruments like Public Provident Fund (PPF), tax-saving fixed deposit and National Saving Certificates (NSC).

Public Provident Fund (PPF)

PPF offers an EEE (Exempt-Exempt-Exempt) tax status. It has a lock-in period of 15 years. The maturity amount and the overall interest earned during the period of investment are tax-free.

Tax-Saving Fixed Deposits (FDs)

Tax saving FD, a special category of fixed deposit, allows investors to claim deductions under Section 80C of the Income Tax Act. Any investor can claim a deduction of a maximum of Rs 1. 5 lakh by investing in tax saving fixed deposits. These tax saving FDs have a minimum lock-in period of five years.

(Also read: How to plan your taxes early to avoid last-minute rush)

National Saving Certificates (NSCs)

NSC is a fixed income investment scheme that investors can open with any post office. It offers an interest rate of 6.8 percent, which is compounded annually but is payable at maturity.

ELSS (Equity Linked Saving Scheme) and ULIP (Unit Linked Insurance Premium)

Other options are market linked instruments like ELSS and ULIP which have a history to give higher returns in the long run, suggests Nitin Shahi, executive director, Findoc.

"These options should be considered by individuals in mid 30’s or below," he added.

ELSS is a tax-saving mutual fund which comes with a statutory lock-in of three years. It offers tax deductions under the provisions of Section 80C. ULIP, on the other hand, invests partly in life insurance and the rest into equity or debt like a mutual fund.

National Pension System (NPS)

In NPS, a government employee contributes towards pension from monthly salary along with matching contribution from the employer. It attracts additional deduction of Rs 50,000 above deduction of Rs 1.5 lakh.

Health and Life Insurance

Health insurance acts like a tax saving avenue by providing tax exemption under Section 80D of the Income Tax (I-T) Act.

Any individual who pays annual health insurance premium for self, spouse or dependent children can claim benefit under section 80D up to Rs 25,000 (for age below 60 years), explains Shahi.

For a life insurance policy, tax deduction under section 80C of the Income Tax Act (1961) allows exemption up to Rs 1.5 lakh per annum.