Five Last-Minute Tax Saving Investments Before March 31

The financial year 2022–23 is coming to a close, and for all those who still have some action to be taken on their investment and financial fronts, there is not much time left to complete the process.

Instead of waiting until the last day and having to rush to meet the deadline with an element of tension, it is better to put the matter aside earlier. There are some tax-related details and even non-tax-related steps that will help in the overall planning process.

Here are five such areas that can turn out to be beneficial.

Public Provident Fund

The PPF is an investment instrument that provides an opportunity for retirement planning. It is a 15-year scheme with the facility for extension in blocks of five years for an unlimited time period. There is a benefit of a deduction under Section 80C when the investment is made into the scheme, and the interest earned is tax-free as well.

This is one of the debt options that can be considered by an investor for their retirement plan, as it has multiple benefits.

Under this scheme, there is a limit of Rs 1.5 lakh that can be used each year for investment. It is advisable to fill this limit, even if there is no need to take a tax deduction, because of the tax-free nature of the return.

The scheme also requires a minimum investment each year, so skipping the investment is also not an option.

Equity Linked Savings Scheme

All the investors looking for a last-minute choice for a tax deduction also have the ELSS option on the equity front. The route does not require a commitment of investment for multiple years. Apart from this, there is flexibility on the amount of the investment that can be made.

The weakness in the equity markets at this point also works in the favour of the investor, because they will be getting more units for their investment. There is a three year lock-in for the investments, which is one of the lowest lock-ins for the options in the tax-saving investment space.

National Pension System

The NPS is an option that allows for the accumulation of contributions that will be paid out as a pension during the later years of a person's life. There is an extra benefit of a tax deduction of Rs 50,000 over and above the Rs 1.5 lakh limit available under Section 80C. Contributions to this will lead to a higher tax benefit.

There are different options for fund managers and the kind of exposure required between equity and debt that a person has to choose. Hence, this can also be tailor-made for the needs of each individual investor.

Pradhan Mantri Vaya Vandana Yojna

This is a scheme that is run by the Life Insurance Corporation of India. Under it, senior citizens are able to get a fixed rate of return for 10 years by investing a lumpsum in the plan. The payout is in the form of a pension amount, and this is done as per the frequency that is chosen by the investor.

According to existing details, the scheme is coming to a close at the end of the financial year 2022–23. This is the last chance for a person to participate in the scheme and lock-in returns of 7.4% for the next 10 years.

Debt Funds

The recent changes to the taxation of debt funds require that all the gains from those funds, where the equity component in domestic equities is less than 35% and have been bought after April 1, 2023, be taxed as short-term capital gains. These gains will be taxed at a marginal rate. This means that investments in debt funds made before the date would have the benefit of indexation and the calculation of long-term capital gains when they are sold.

This, along with the higher yield situation in the economy, makes it the right time for investors to buy into target maturity funds or other debt funds as per the needs of their portfolios to lock into yields for a longer period of time.

This can ensure a higher net rate of return from this debt investment for many years. It can be completed before March 2023.