Instead of waiting until March to make taxsaving investments, take advantage of the fire sale on in the stock market right now… invest in equity-linked savings schemes (ELSS)…
They say, there are only two things are certain: death & taxes. 
We may not discuss these issues openinly in our society (especially in India). You hate it or love it - you can’t ignore it. Most of us usually think about taxes and tax investments only in the month of March. While this can be a good strategy, given the falling stock market (and falling prices of almost all shares), it is an ideal time to take full advantage of this free fall.
Don’t trust me? Let me explain. You would ideally invest around Rs 1,40,000 per person for a given financial year towards taxes. Now there are a few instruments where you can invest this amount for better returns when they mature: ULIP (unit linked insurance plan), ELSS (equity linked saving scheme), tax saving mutual funds, LIC (life insurance) policy, NSC (national savings certificate), Kisan Vikas Patra, etc. Typically towards the end of the financial year, we tend to reconcile all our finances and then invest in one/many of these instruments and thus claim relief from the taxes we pay.
Assume that you invest whole of Rs 1,40,000 in equity linked schemes and get around 14,000 units (assuming you invest in NFO priced at Rs 10 each). So typically the value of your investments would depend upon the position of the equity market at the time of their maturity. It may be less than same, or even more than what you’ve invested. But if you invest in a already running scheme (which is already priced at much below Rs 10), you would get much more units for the same price - for the sake of our example, you’d perhaps get around 20,000 units. So when these units mature, you would get many times more income than that in the first case. The point I want to make here is: you anyway have to plan for your taxes - you absolutely can’t escape from it; why not invest it right now when the market is at its bottom. You would, in the long term, end up much more wealthy…
A silver lining to the market cloud
The recent drop in equity markets has brought stock valuations down to compelling levels. Mutual fund NAVs have plunged, some by as much as 50% over the past three months. While this is obviously unfortunate for existing investors, it’s extremely good news for those who are evaluating their investment options under Section 80C. This fire sale at the stock market won’t last beyond five to six months. So why to lose this fantastic opportunity?
What it all means for you
So what does all this have to do with tax planning? Well, if you plan to invest in ELSS, do so in three or four parts over the next two months. Markets could rally back to reasonable levels from January. Take advantage of current bargain-basement prices to invest in equity and save tax in one shot. Waiting until March could mean you lose out on any rally in the next three to four months.
Do all equity funds have tax benefits? ELSS funds are special open-ended equity funds that carry tax benefits under Section 80C. Other equity funds do not offer Section 80C benefits.
Can I invest in ELSS at any time? Yes. Although people tend to wait until March, you can invest in them any time of the year.
Will the lock-in period begin in March? No, the three-year lock-in doesn’t begin from the end of the financial year in which you invest—it begins right from the date of your investment.
Which ELSS funds can I invest in? Most of the financial advisors recommend Sundaram Taxsaver, Fidelity Tax Advantage, Franklin Taxshield and HDFC Taxsaver. These have a long track record and have fared reasonably well through different markets.
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