nvestors are wary of investing in tax-saving mutual funds (equity-linked savings schemes or ELSS in mutual fund parlance) this tax-planning season, say financial advisors. The abysmal performance of these schemes in the past three years and the current higher level of the market are cited as the reasons for investor disinterest.

According to Value Research, a mutual fund tracking entity, ELSS funds, as a category, have given a mere 0.33% returns in the last three years. With the tax planning season beginning in December, most companies ask their employees to submit investment declarations around this time.

Investors can avail of a tax deduction of up to Rs 1 lakh under Section 80C by investing in a host of options like ELSS, tax-saving 5-year bank fixed deposits, the Public Provident Fund (PPF) or National Savings Certificate (NSC), among others.

"Investors, who invested in ELSS three years ago, are disappointed with lower returns. Clearly, they are not keen to invest in tax-saving mutual funds again and they prefer to invest in either PPF or tax saving bank deposits," says Abhishek Gupta, certified financial planner, Moat Wealth Advisors. Investors have also become cautious about investing in stocks due to weak economic fundamentals say experts.

"Since investors have not made money for three years, they have turned risk averse, and want to protect capital," says Anup Bhaiya, MD and CEO, Money Honey Financial Services. That is the main reason why many investors would flock to PPF or tax-saving bank deposits.

Invest as per asset allocation However, experts frown upon such "random" tax-planning exercise. They argue that investors should consider tax planning as part of their overall financial plan and choose products accordingly. They say picking tax planning instruments on the basis of past performance alone won't help one reach the right conclusions.

"Make a financial plan based on your earnings, liabilities and goals. This financial plan will tell you how much money would go into various22/11/2013 Put your money inright schemes tosaveontax- The Economic Times economictimes.indiatimes.com/personal-finance/savings-centre/savings-news/put-your-money-in-right-schemes-to-save-on-tax/articleshow/26177199.cms?prtp
2/2 Other Times Group news sites