Every year in March, salaried employees rush to save tax without reviewing their actual taxable income structure. This panic-driven investing often results in locking money into unsuitable products, missing documentation deadlines, or overinvesting in low-return instruments.
The Indian tax system offers structured deductions, but using them blindly reduces liquidity and long-term returns. Instead of reacting emotionally, structured tax planning prevents unnecessary losses.
Understanding the deduction limits clearly is the first step.
Know Your Major Deduction Limits
Here are the most relevant deduction caps under the old tax regime:
| Section | Deduction Limit | Common Instruments |
|---|---|---|
| 80C | ₹1,50,000 | EPF, PPF, ELSS, Life Insurance |
| 80CCD(1B) | ₹50,000 | NPS (additional) |
| 80D | ₹25,000 (₹50,000 for senior citizens) | Health insurance |
| Section 24 (Home Loan Interest) | ₹2,00,000 | Housing loan interest |
Exceeding these limits does not provide additional tax benefit.
Mistake 1: Investing Only to Save Tax
Many investors buy traditional insurance policies or 5-year FDs in March purely for deduction under 80C. These may provide low returns compared to alternatives like ELSS mutual funds.
Example comparison:
| Instrument | Lock-in | Expected Return Range |
|---|---|---|
| ELSS | 3 years | 10–14% (market-linked) |
| 5-Year FD | 5 years | 6–7.5% |
| Endowment Plan | 10–20 years | 4–6% effective |
Choosing the wrong product reduces long-term wealth.
Mistake 2: Ignoring Regime Selection
If you opt for the new tax regime, most deductions like 80C and 80D are not available. Investing under old regime assumption while filing under new regime leads to wasted capital.
Compare estimated tax liability under both regimes before making investments.
Example for ₹10 lakh taxable income:
| Regime | Approx Tax Liability |
|---|---|
| Old (after deductions) | Depends on investment |
| New | Flat slab-based without deduction |
Always calculate before investing.
Mistake 3: Missing Proof Submission Deadline
Employers require proof submission before payroll cutoff. If you invest but fail to submit proof, TDS may still be deducted fully. Although you can claim refund while filing ITR, it affects monthly cash flow.
Submit documents well before deadline.
Mistake 4: Overinvesting Beyond Limit
If your EPF contribution already covers ₹1.5 lakh under 80C, investing additional in PPF or ELSS for deduction is unnecessary from tax perspective.
Example:
EPF annual contribution: ₹1.6 lakh
Additional ELSS invested: ₹50,000
Tax benefit on extra ₹50,000 = Zero under 80C.
Overinvestment reduces liquidity unnecessarily.
Mistake 5: Forgetting NPS Additional ₹50,000
Many salaried employees exhaust 80C but forget 80CCD(1B). Investing ₹50,000 in NPS can save:
| Tax Slab | Approx Tax Saved |
|---|---|
| 20% | ₹10,400 |
| 30% | ₹15,600 |
This deduction is separate from 80C.
Mistake 6: Not Claiming Health Insurance Deduction
Premium paid for self and family qualifies under 80D.
| Category | Deduction Limit |
|---|---|
| Self + Family | ₹25,000 |
| Parents (Senior Citizen) | ₹50,000 |
Missing this claim results in unnecessary tax payment.
Mistake 7: Ignoring Capital Gains Tax Planning
If you sold mutual funds or shares during the year, short-term or long-term capital gains tax may apply. March is the last opportunity for tax-loss harvesting.
Example:
If you have ₹40,000 LTCG in equity (below ₹1 lakh exemption), you may not owe tax. However, planning gains and losses strategically can optimize liability.
Quick March Checklist
Before investing, verify:
-
Old vs new regime comparison
-
Remaining 80C limit
-
NPS 80CCD(1B) usage
-
Health insurance premium eligibility
-
Home loan interest deduction
-
Capital gains position
Structured review avoids regret.
Example Calculation: Old Regime Optimization
Assume taxable income ₹12 lakh.
If you claim:
-
₹1.5 lakh under 80C
-
₹50,000 under 80CCD(1B)
-
₹25,000 under 80D
-
₹2 lakh home loan interest
Total deduction = ₹4,25,000
Taxable income reduces to ₹7.75 lakh, significantly lowering tax liability.
Proper planning saves more than rushed investment.
Conclusion
March tax panic often leads to wrong financial decisions. Instead of blindly buying products, calculate deduction limits, compare tax regimes, and align investments with long-term goals. Use deductions strategically without compromising liquidity or returns.
Tax saving is important, but wealth building matters more. Structured planning eliminates both tax stress and investment regret.
FAQs
Can I claim deduction if I invest on March 31?
Yes, if payment is completed before financial year end and proof submitted as required.
Should I invest only in ELSS for tax saving?
Choose based on risk profile and long-term goals, not solely on tax benefit.
Is NPS compulsory for additional ₹50,000 deduction?
Yes, 80CCD(1B) applies only to NPS contributions.
Can I claim deductions under new tax regime?
Most deductions like 80C and 80D are not available under the new regime.