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Come March and fears of the taxman loom large. It's a mad scramble for investment avenues and saving maximum tax possible is topmost on the agenda. So here's giving you a lowdown on the various investment options you have and the tax benefits you can avail there from.

But before you hastily park your funds anywhere ask yourself.

Will I need this money in the next few years? Can I afford to invest for long term?

Am I willing to take risk? If so how much?

Investment options are aplenty. But before you narrow down on any one, you need to work out an assessment of your financial needs - short term as well as long term. How soon will I need the money? How long can I wait till my investment matures? What is my risk profile?

Your choice of investment avenues will depend on your answers to the above. That said, here are the finer details you need to consider before taking the plunge:

Tax benefits can be grouped into three categories such as tax-free income, deductions from total income and tax rebates that you can avail of.

Tax-free income

Firstly, lets understand the investment avenues that allow us tax-free income. Tax-free income means the individual need not do anything to avail of tax benefits. The following would fall under this category:

Agricultural income

Provident Fund and & PPF Interest

RBI Relief Bonds Interest

Post Office Savings Account Interest

Is it Section 88 benefits you are looking for? Check out the rebates you can get

Under Section 88 of the IT you get rebate on investments upto a maximum of Rs 100,000 made by an investor.

Some of these investments are as under:

PF and PPF

LIC Premiums

NSC etc.

Repayment of Hsg Loans upto max Rs 20,000/-per annum.

Children school tuition fees upto Rs 12000/- per child for two children.

The above rebates are allowed upto a maximum of Rs 70,000/- per financial year. Apart from the Rs 70,000/- mentioned above a further rebate of Rs 30,000/- is available for investments in Infrastructure Bonds.

Check out the following options that offer rebates under Section 88 of the Income Tax Act:

Tax saving mutual funds

Life insurance

Post office schemes

Infrastructure Bonds etc.

The rebate as a percentage of investments made is:

30 % rebate on two conditions satisfied:

a. Income chargeable under the head 'Salaries' (before giving deduction under Section 16), does not exceed Rs 100,000 and

b. Income chargeable under the head 'Salaries is not less than 90 percent of gross total income.

20% rebate if gross total income < Rs 1,50,000 p.a.

15% rebate if gross total income > Rs 1,50,000 p.a.

Nil rebate if gross total income> Rs 5,00,000

Insurance

Is it insurance that you plan to put all your money? Before you take the plunge, ascertain whether you have enough insurance. Less or more insurance can be equally harmful to your financial health.

Most individuals consider insurance to be yet another tax saving tool which is wrong. Insurance should be bought after ascertaining your changing requirements and should be revised once in three years. Buy insurance for risk coverage, not with an aim to save tax and if tax benefits follow, nothing like it.

All said, know that all life insurance policy investments offer you benefits under Section 88 of the Income Tax. The following LIC policies allow you tax benefits under Section 88.

• Komal Jeevan - Plan No. 159
• Children Deferred - Plan no.41
• Jeevan Kishore - Plan no.102
• Jeevan Chhaya - Plan no.103
• Marriage Endowment/Educational Annuity - Plan No. 90
• Jeevan Anurag - Plan no.168
• Endowment with Profits - Plan no.14
• Limited Payment Endowment with Profits - Plan no.48
• Jeevan Mitra - Plan no.88
• New Jana Raksha Policy - Plan no.91
• Jeevan Anand Plan no. 149
• Jeevan Mitra Triple Cover - Plan no.133
• Jeevan Saathi - Plan no.89
• Money Back with Profit - Plan no.75
• New Money Back - Plan no.93
• Jeevan Surabhi 15 yrs - Plan no.106
• Jeevan Surabhi 20 yrs - Plan no.107
• Jeevan Surabhi 25 yrs - Plan no.108
• Jeevan Bharati Plan No 160
• Jeevan Samriddhi Plan No 154, 155, 156 157
• Jeevan Rekha Plan 152
• Convertible Term Assurance - Plan no.58
• New Bima Kiran
• Term Assurance
• Anmol Jeevan I Plan no 164
• Whole Life with Profits - Plan no.2
• Limited Payment Whole Life with Profits - Plan no.5
• Single Premium Whole Life - Plan no.8
Rebate for senior citizens under section 88B:

Senior citizens resident in India, having attained the age of 65 years or more are entitled to tax rebate of :a. the amount of income tax before giving any rebate under Sections 88, 88B, 88C and 89 (1) or Rs 20,000 whichever is less.

Rebate for women under section 88C: Women residents in India below 65 years have an advantage of Rs 5000/- rebate from their tax payable. Women residents in India above 65 years have the benefit of rebate under section 88B of Rs 20,000/- available to all senior citizens.

Rebate for individuals earning less than Rs 1,11,240/- under Section 88D: The Finance Act 2004 entitles individuals to deduction of hundred percent tax if the total income does not exceed Rs 1,11,240 such persons have to file income tax returns but can claim the tax payable as rebate under this section.

Deductions:

Deduction under Sec 80G - Donations

These are deductions from Gross Total Income with respect to donations made to Charitable Institutions, Prime Minister's Drought Relief Fund, etc.

Deduction u/sec 80CCC - Pension Funds:

These are deductions from Gross Total Income with respect to contributions upto Rs 10,000/- made to certain Pension Funds.

Deduction u/sec 80L - Interest:

These are deductions from Gross Total Income in respect of interest of certain securities, bank deposits, etc. These would be Central or State Government securities, NSC's interest on deposits under the Post Office Monthly Income Account, NSS interest on debentures/bonds etc upto a maximum of Rs 12000/- (an additional amount of Rs 3000/- to be deducted for income from Government Securities.)

Deduction u/sec 80D - Health Benefits and Mediclaim:

These are deductions from Gross total Income in respect of medical insurance premia paid upto a maximum of Rs 10,000/- p.a. If the assessee is a Senior Citizen then an additional deduction of Rs 5000/- is available to him. Medical treatment of Handicapped Dependants - 80 DDB

Deductions u/sec 80E - Loans for Higher Education:

Repayment of loan and interest on account of higher education is deductible from Gross total Income upto a ceiling of Rs 40,000/- provided the loan has been taken from a financial institution or an approved charitable institution for pursuing higher education. This deduction will be allowed in the year of initial investment and for 7 years succeeding the initial assessment year.

PPF:

While investment in a PPF account will allow you withdrawal only after 6 years since it has a lock in period the security factor is high. Also it offers you tax benefits under Section 88 of the Income Tax Act for deposits upto Rs 70,000/-. The interest accruing is also exempt under Section 10 of the Income Tax Act.

Capital Gains Tax:

When an individual sells a capital asset, the difference between the cost/acquisition price and the sale/transfer price is referred to as capital gain. If the asset is held for a period of less than 3 years it is a short-term capital gain but it is a long term capital gain if the asset is held for more time.

But if you wish to avoid paying the huge tax you would incur on your gain you have a choice. Long term capital gains would be exempt if invested in Nabard, National Highway Authority of India, National Housing Bank or Rural Electrification Corporation (u/sec 54EC) or in eligible IPO's of equity shares (u/sec 54EB) or in the purchase of a new house (u/sec 54/54F). Note that you need to invest within 6 months from the sale of the asset in question and remain invested for 3 years failing which you may lose benefits.