Siva Rao bought a life insurance policy a few years ago to save tax. But now that he pays a fat home loan EMI, Rao finds it difficult to service the Rs 1 lakh insurance premium. Vilas Patil wants to invest in the NPS but is not sure if he can claim tax deduction because he has already exhausted the Rs 1.5 lakh limit under Section 80C. Nardeep Singh is facing a liquidity crunch and doesn’t have enough for tax savings. He wants to know if it is possible to redeem his ELSS funds and reinvest the pr ..

Scores of other readers have written to ET Wealth in the past few weeks seeking advice on tax planning. This week’s cover story is packed with the information they need. Like in the past, we have assessed 10 tax-saving instruments on eight key parameters—returns, safety, flexibility, liquidity, costs, transparency, ease of investment and taxability of income. Each parameter is given equal weightage and the composite scores of the various tax-saving options determine their place in the ranking.

Although the ranking is largely unchanged, there has been some reshuffling in this year’s pecking order. Despite the introduction of the tax on long-term capital gains from stocks and equity funds, ELSS funds still occupy the pole position. But NPS has jumped up from fifth place to the second rung. This is largely due to the changes in the investment limits and tax rules for the pension scheme. Ulips too have become a little more attractive after some insurers came out with plans that return the mortality charges paid on the policy.

However, some options have not improved their place in the ranking. Rao’s predicament is a good example of why one should not buy traditional life insurance policies to save tax. They give very low returns and the high premiums prevent the policyholder from investing in other options. That’s why life insurance is at the bottom of the heap this year as well.