It’s that time of the year when salaried employees scramble to make last-minute tax-saving investments for the financial year 2020-21. And if they have already made their investments, then they scramble to gather proofs to be submitted. It’s a race against time. That is, if you had informed your employer of your decision to stick to the old, with-tax-deduction regime. For those who have chosen the new regime, the documentation will be minimal. Here are five crucial aspects of tax-planning that you must keep in mind.

I have a financial plan in place already. Should I allocate funds to my tax-saver investments separately?

Tax-planning is a part of financial planning. Align your tax-saver investments with your goals and overall strategy. “Tax planning should be part of your overall investment strategy. You will make these investments every year, over your entire working life. So, you must manage it in such a way that it helps build in building a large corpus over the long term,” says Prableen Bajpai, Founder, FinFix Research and Analytics. Starting early will help you achieve this.

For instance, many equity investors feel that an equity-linked saving fund is an automatic choice. But most of us forget that our employees provident fund (EPF) contribution takes a big chunk of Section 80 C basket of investments. Still, ELSS is a good choice, especially for the young and millennials just starting out on their investment journey. But if you already have a well-established portfolio, then an ELSS may not be necessary.

If you want to create an education corpus for your daughter under the age of 10, you can start a Sukanya Samriddhi Account for her before looking at further options. It entitles you to tax benefits under section 80C and it yields 7.6 percent, secure returns, which is tax-free. The return is subject to quarterly review by the finance ministry.

Should I invest in ELSS now that markets are at record highs?

Experts say that ELSS funds are still a good tax-planning choice.

“I would still recommend them. No one knows what the market levels will be in the future. Even if returns do not match your expectations at the end of three years, you can stay invested over the long term. You will still be able make decent returns,” says Amol Joshi, Founder, Plan Rupee Investment Services. But if you’ve waited till now to start an ELSS, a systematic investment plan (SIP) may not be enough to invest your entire amount. Amol advises you to spread it over January, February and March instead.

In a hurry, do not make the mistake of merely going by last year’s returns to pick funds. “Markets are at record highs at the moment, so your investment horizon has to be longer. You need to think long-term, beyond the three-year lock-in. In any case, the minimum horizon for equities is five years,” says Bajpai.

Can I make tax-investments online and quickly? I do not have much time.

Yes, with several fintech apps and online investment portals, it’s possible to invest online, swiftly. But make sure you know what you’re doing. Else, seek advice from a financial advisor. “If you are starting out and have never invested in equities, tread carefully instead of rushing to invest in ELSS only because it is operationally possible online,” says Bajpai.

In the case of insurance policies, the process can be completed entirely online only if the insurer does not insist on physical medical check-ups. You can also invest online in Public Provident Fund (PPF), provided you have an account with India Post or in banks such as State Bank of India (SBI) and ICICI Bank. Otherwise, the process could take longer as KYC requirements would need to be fulfilled.

Tax investments come with lock-in. But do they allow premature withdrawal? And would I lose my tax benefits then?

All tax-saver options come with a lock-in period, ranging from three years (ELSS) to up to 60 years of age (NPS). That’s the price you pay for tax deduction benefits. You cannot withdraw or redeem certain investments before the expiry of the lock-in period – for example, ELSS and tax-saver fixed deposits.

NPS, though, allows partial withdrawal of 25 percent of your contribution after three years for specific purposes.

Tax-free partial and premature withdrawals from EPF are permitted before maturity for specific purposes. However, if you wish to withdraw your EPF balance before completing five years of continuous employment, the lump-sum will attract tax.

“If you happen to sell your house within five years from the end of the financial year in which it was acquired, tax benefits that you have claimed under section 80C will be rolled back. The amount will be added to your income in the financial year in which it was sold and taxed accordingly,” says Vaibhav Sankla, Principal, Billion Basecamp Family Office.

A life insurance policy terminated within two years of purchase will mean having to let go of the tax break claimed earlier on premium paid. Since many tax-payers often tend to buy life insurance policies in a hurry only to regret later, you must bear this point in mind before signing the proposal forms.