Which Deductions should I avail?

There is no general answer to this question. It depends on your age, financials, financial goals, current investment products, current taxable incomes of family members, etc. Some of the points to think over are

  • Whether you are already overinsured? (Use our life insurance planning calculator to check how much insurance you need.) If yes, there is no point in buying insurance just to save taxes
  • What is your risk profile? If your risk apetite is low, then you should invest only in fixed income products that provide stable returns. Some of the products are Term Deposits of more than 5 years, NSC certificates, endowment policies, etc. If your risk profile is high you can opt for Equity linked savings schemes or ULIPs where the returns are higher but risks are higher too.
  • What is the time period of your investment? If the time period is short like 3 to 5 years, you should invest only in fixed income deposits so that the returns are stable. But for longer time period, depending on risk profile, you can invest in equity which will give higher returns.
  • There are other areas where tax exemption is available? For example interest on housing loan upto Rs. 1.5 lakhs and repayment of principal on housing loan under setion 80C upto Rs. 1 lakhs is exempt. You may take a housing loan to realize financial goals and also save taxes
  • Interest paid on education loans is also exempt. It may be advisable to take loans for education and home loans only and reduce loans in other areas like auto loans, personal loans, etc.