Investing from the cash flow of your salary or business income is fine. But you should also consider re- investing the returns generated from your past investments to meet your targeted tax savings.

Dividend/ interest payments that can be invested in tax saving instruments: Use dividends paid by stocks or mutual funds to invest in a tax- saving instrument. With stock markets touching new highs, you can be sure that some of your equity investments (mostly mutual funds) will pay dividends in the coming months.

Interest earned from fixed deposits, nonconvertible debentures and tax- free bonds can also be invested in tax saving instruments.

Dig into matured investments: If existing investments are maturing, and, if they are not aligned to any goal, the money received can be invested in a Section 80C instrument. The investment you choose must depend on your time horizon, the composition of your portfolio and, of course, your risk appetite.

Recycle tax- saving funds:

 If your existing ELSS investments are maturing, redeem them and reinvest the money in a tax- saving fund. If you had invested in an ELSS through a systematic investment plan, or SIP, some SIP payments may be older than three years.

Redeem them and re- invest in a tax saving fund. If you have opted for a dividend re- investment plan of a tax saving fund, claim deduction on dividends that are re- invested.

Claim deduction on interest from National Savings Certificate (NSC):

Interest from NSC is considered to be reinvested and can be claimed as deduction under Section 80C. However, you will have to show it as income in your tax return.

Claim deduction on premium for credit insurance:

 If you have taken a loan to buy a house, a car or for financing your children higher education, it is likely that you have bought credit life insurance, which covers the loan in case of your death. The premium for this policy can be claimed as deduction under Section 80C. Since these are treated as single- premium polices, the total premium can be deducted from income in the year it is paid.

Other Avenues: Interest on Home Loan:

The government has increased the deduction limit for interest paid on home loans for self- occupied houses from Rs 1.5 lakh to Rs 2 lakh. This will help individuals in the highest tax bracket save up to Rs 15,450 additional tax.

If the loan is for a property in which the person does not live, the total interest paid can be claimed as deduction. No deduction is allowed on an under construction property. However, tax benefits can be claimed for five years after the house has been built.

Rajiv Gandhi Equity Savings Scheme (RGESS):

The scheme allows first- time equity investors claim deduction on 50 per cent of the amount invested in approved stocks and mutual funds. The maximum investment on which the deduction can be claimed is Rs 50,000. This means the deduction limit is Rs 25,000. This is only for those whose annual income is up to Rs 12 lakh. The benefit can be availed of only for three years.

Health Insurance Premium:

Premium for health insurance covering self, spouse, children and parents is deductible up to Rs 20,000 for senior citizens and Rs 15,000 for others. If you are paying premium for parents health insurance, you can separately claim a deduction of up to Rs 20,000. Any expense on preventive health care up to Rs 5,000 can be included.

Deduction on house rent:

 House rent allowance ( HRA), which is part of your salary, is exempt from tax if you live in a rented house. The exemption is the least of the

1) actual HRA received from the employer,

2) house rent paid by you minus 10 per cent basic salary or,

3) 50 per cent basic salary if you live in a metro city or 40 per cent if you live in a non- metro city.

You can claim deduction on the rent paid even if HRA is not part of your salary. The deduction is the least of the

1) rent paid less 10 per cent of taxable income,

2) 25 per cent of taxable income or,

3) Rs 2,000 a month.