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    Did Covid disrupt your ELSS investments this financial year? Here is how to get back on track

    Synopsis

    These steps would help you to avoid running around in the last minute to finalise tax saving investments to save taxes of up to Rs 1.5 lakh at the end of the financial year.

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    Many individuals haven't started their investments in Equity Linked Saving Schemes or ELSS funds to save taxes this financial year due to job threats or likely pay cuts caused by the Covid-19 pandemic. Here are a few things you can do to get your tax saving investments back on track. These steps would help you to avoid running around in the last minute to finalise tax saving investments to save taxes of up to Rs 1.5 lakh at the end of the financial year.

    One, how serious is the threat? If your industry is facing a grave threat and the situation is unlikely to improve even after the lifting of lockdown, you have to assess how vulnerable your position would be. Talk to your seniors for clarity. If your job is indeed under threat, you should focus on enhancing your contingency fund and your liquid assets to tide over the situation. Investments can take a backseat till the situation improves.

    If you are likely to face a pay cut, you should first assess its impact on your savings and investment plans. If they are going to be impacted, you should try to slash your discretionary expenses to make sure that at least your long-term investment plans are not impacted in a big way. It is okay if you can't salvage the situation. If that is the case, you should also focus more on your contingency fund and creating more liquid assets if there are more pain in the coming months.

    Have a relatively large contingency fund that would take care of your living expenses for at least a year. this along with your liquid assets in bank deposits and debt funds should be enough to tide over the situation at least for a year.
    What if you can barely get on only with your long-term investment plan and cannot find the extra money to invest in tax saving mutual funds?

    You can pause your investments in other open-ended mutual funds for the time being and start investing in tax saving mutual funds to take care of your tax saving exercise for this year. Since ELSS are also equity mutual funds, you can assign these investments also to your long-term financial goals. This will ensure that you do not disrupt both the long-term investment plan and tax saving plan.

    Since this is a dire situation, investors can also look at recycling their old ELSS investments. `Recycling' refers to the practice of selling an old ELSS investment that has completed the lock-in period and reinvesting the money again in an ELSS to claim the tax deduction. Mutual fund advisors frown on this practice as it adversely impacts the saving and investment share. However, you will be forgiven this year because of the peculiar situation.

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