It is the familiar story every year. The company's accounts department send out notices to submit proof of investment for tax exemption. You run around, borrow or break fixed deposit or liquidate investment to make fresh investment before the last date to claim tax breaks. You have been doing it every year, right? A last minute investment in public provident fund is all you do to save taxes? Financial advisors say most people don't even know the full implication of tax breaks. "Most people invest whatever they can and claim tax deduction. Some won't be availing the full exemption,'' says a chartered accountant. "A tax deduction plus tax free returns can add a lot to your savings.'' Tax consultants also vouch for the fact that most of us are unaware of how much tax we can save. They also say some people don't even bother to consider saving tax. "They would pay taxes because they don't want to bother about tax planning. They think it's a tedious process,'' says a tax consultant. "Sure, you have to do some paper work. But it is not very complicated. Also, you should know the heads under which you can claim tax breaks.'' He gives a few examples: You can buy medical insurance cover for you and your family and claim up to Rs 15,000 tax deduction under Section 80D of the Income Tax. You can also invest in certain avenues and claim tax deduction up to Rs 1 lakh under Section 80C. "There are specific heads like housing loan, tuition fee, medical expenses... which qualifies for tax breaks. But they are case specific.'' Now that you know various heads, are you ready to consider your various options this time well ahead of the deadline? If yes, then first things first. That is to go for an insurance cover first. Health cover is a must for everyone. And a life insurance is a must for anyone with dependents. Life insurance premiums qualify for tax deduction under section 80C. Now, consider your employee's provident fund contribution. Find out how much is left in the Rs 1 lakh limit. Let us consider this example: Suppose your insurance premium is Rs 30,000 per year and your EPF contribution is 36,000. That means you can invest around Rs 34,000 and take full benefit under section 80C. Before rushing to the bank to invest the money in the Public Provident Fund account, hold on for a second. Why don't you be a bit adventurous this time? Sure, PPF gives you government guaranteed returns and it is one of the safest investment avenues available today. But do you know how much money are you foregoing for the safety factor? For example, a tax planning scheme from mutual funds (ELSS or equity linked saving scheme) has returned around 60% in the last one year; the category average return is around 47% in the last three years. How does it compare with your 8% returns from a public provident fund? Come on, if you have at least 10 years to go for your retirement, you can park a bit in ELSS to earn more. To begin with, split the amount between PPF and ELSS. Now since you have decided to invest in a tax planning scheme, be careful while selecting one. Don't go for flashy returns. Always look for consistent returns at least in the last five years. Also, look the risk rating. You can find this information from various newspapers, magazines or even from the internet. Also, place emphasis on the reputation of the fund house before picking a scheme. Now, you don't have to wait till the deadline to make that investment. You can start it from this month if you have the money in the bank. Anyway, don't wait for March, the last month of a financial year. Investment advisors say tax planning is easy and most effective when done from the beginning of the financial year. "If you are doing it from the beginning from the financial year, then you have the time and you can also adopt a disciplined approach. Also, it is the most effective way to invest in a tax planning scheme as you can use the systematic investment plan route,'' says a financial advisor. – www.timesofindia.com