As a starting point, you may like to read my last post on tax saving options -http://mbaclassdiscussions.blogspot.in/2011/12/how-to-save-tax-under-section-80c.html
Not much has changed since I last wrote this - except one thing - the finance minister, Mr Jaitley, has increased the amount that you can invest under this section from Rs. 1.0 lac to Rs. 1.5 lacs per annum from this year.
Tax saver Mutual funds are basically equity funds that have 60% plus exposure to equities. To avail of tax benefit, you need to stay invested in the fund for three years and that is where the catch is. In Mutual funds, I do not believe in committing to stay invested in one fund for so long. With the markets being so dynamic, I believe in keeping a check on MF’s every quarter and changing my portfolio if the situation demands.