As you know, mutual fund advisors typically ask investors to choose mutual funds based on their goals, investment horizon, and risk profile. It meant you would invest in equity mutual fund schemes if you have a long-term financial goal and necessary risk appetite. Further, based on your risk appetite, you would choose a category like large cap, mid cap, multi cap, and so on.
Well, some experts believe that investors can let go of that rule for the time being and choose tax-saving mutual funds or ELSS (Equity Linked Saving Scheme) to invest in the current circumstances. They reason that investors anyway would need to invest in ELSS to save under Section 80C, and they can focus on it now. If they still have surplus cash, they can go back to the old rule and choose a category accordingly.
Advisors say this method would help regular investors with modest surplus to cover their tax saving investments right away. Even if they face pay cuts or job cuts, they would have their tax-saving investment done. If they choose any other scheme now, they would struggle to fulfil their tax-saving exercise. Also, since the markets are down, it is a great opportunity to invest in ELSS funds to meet long-term financial goals, they say.
Most individual investors with surplus cash of Rs 1-2 lakh can use the money to take care of the tax planning needs of both the spouses immediately. They reason that most middle-class taxpayers only need to invest Rs 75,000 to Rs 1 lakh to cover their Section 80C requirement, as their Employee’s Provident Fund and life insurance premium will more than make up for Rs 1.5 lakh upper limit under Section 80C.
Investments in certain options help investors to save taxes of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.