We happily spend sufficient time comparing alternatives before buying a smartphone. However, we rarely follow the same practice when it comes to selecting an investment product. The stress to meet the tax-saving deadline, combined with the cumbersome task of going through the features of various investment products, acts as a big deterrent.

But don't worry! You don't need to break sweat to figure out your tax-saving alternatives. We have listed the main investment options that offer tax benefits. Besides, to facilitate comparison, we have also tabulated their essential features.

Read on as we declutter the maze of tax-saving options so that you can pick the right options.

Sabse Pehle Insurance
Life insurance comes first, especially if you have financial dependents. It is a must! Consider it as a cost to protect the financial future of your loved ones. But you must buy only a term insurance plan. The premium that you pay is eligible for tax benefit under Section 80C. Do not opt for endowment insurance plans or unit-linked insurance plans (ULIPs), which claim to provide the twin benefits of insurance and investment. As you get closer to the deadline, these two products will be pitched to you in a big way. However, don't get influenced to buy them. This is because they neither serve as a good investment nor provide adequate life insurance coverage. Click here to find out why we think so..

Keep it as simple as possible when it comes to insurance. Buy a cheap term plan with an adequate insurance cover.

Saving taxes while creating long-term wealth
Don't invest only to save taxes. Since many investors can only do tax-saving investments, it is important to make them count. Consider such investments as a way to achieve your long-term goals, such as paying for your child's higher education or creating an accumulation for your retirement. Among the alternatives tabulated above, Equity-linked savings schemes (ELSS) and National pension scheme (NPS) will help you create long-term wealth. Returns of such market-linked investments may look artificially low especially over the short-term at this point of time. But that is due to the recent massive fall in equities due to the Covid crisis. Equities are volatile in nature and can be a risky bet over the short term, but in the long term they tend to give superior inflation-adjusted returns. Many insurance agents also include ULIPs here, but as you know by now, they are poor products and therefore avoidable.

ELSS should be the mainstay of your tax-saving investments. You can simply subtract your mandatory deductions, such as the EPFO and the life insurance premium from the available limit under Section 80C and invest whatever is left in one or two good ELSS funds. They are transparent, well-regulated products and offer great long-term return potential. They also happen to have the shortest lock-in period (three years) among all tax-saving alternatives. However, you should ideally plan to remain invested for longer to benefit from their superior return potential. Here is a list of top rated ELSS funds and their performance records.

NPS is also a viable option for wealth creation and its low cost is an added benefit. But it will lock your money in till you reach the age of 60. However, partial withdrawals are allowed before that only under specific circumstances. Moreover, you will necessarily have to buy an annuity product with at least 40 per cent of the money you receive at the age of 60. The charm of NPS lies in the fact that it helps you avail an additional deduction of up to Rs 50,000 over and above the Rs 1.5 lakh limit offered by Section 80C. You can consider investing in it to avail this extra exemption. There are several plans and options available to you under NPS.

You may now ask: how about PPF, the most popular tax-saving instruments? Well, it is a 15-year product and over such a long horizon, ELSS funds work out to be the best because of their better return potential. But those who get easily unnerved by the ups and downs of the equity market can consider investing some portion of their tax-saving allocation in PPF. Among the fixed income options, it is clearly ahead of others. A tax-free return of 7.1 per cent (though it is subject to quarterly revisions) is quite attractive for an assured return instrument.

Other alternatives
ELSS, NPS and perhaps a little bit of PPF usually take care of tax-saving requirements of most individuals. However, those who are still looking for a fixed-deposit kind of product with a shorter maturity period can consider National Savings Certificate (NSC). Of the three options available here (the five-year post office deposit and the five-year bank FD being the other two), NSC wins because of its better return and the sovereign guarantee.

So, there you go! That's, by and large, all you need to know to make your tax-saving investments. If you opt for ELSS, which you should if you have the time by your side, do not wait till the month of March. It is better to spread out your investments in ELSS over a number of months. So, if you have Rs 70,000 to invest in ELSS this financial year, better invest Rs 7,000 each in these ten months than investing all of it at one go.