Choosing the right tax-saving instrument: 4 things to consider

You may lower your tax liability and create a safe financial future with plenty of savings by making thoughtful investments in tax-saving products.
Your financial objectives, risk tolerance, and liquidity requirements will all play a role in the banking instrument you choose to save taxes. Take into account the following aspects to consider:

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Make sure the lock-in duration for the selected instrument is something you are comfortable with. When compared to other tax-saving choices, the lock-in periods for tax-saving FDs and SCSS are for 5 years. While, tenure of PPF is 15 years.

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Though typically regarded as secure, banking products yield less than equity-based choices such as ELSS. Prior to making a decision, consider your time horizon for investing and your comfort level with risk.

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For tax-saving FDs PPF, SSY, SCSS or any other tax saving instruments, compare the interest rates that various banks are offering. Over an extended period, even a slight variation in interest rates can have a substantial effect on your profits.

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Consider your liquidity requirements. Tax-saving instruments such as, PPF and NSC may not be suitable if you anticipate needing access to your funds before the lock-in period ends.

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