Does it make sense to continue with ELSS investments after the new personal tax regime?

Financial planner: Ashish Modani, Founder, SLA Financial Solutions, a wealth management firm based in Jaipur.

Questions asked by investors:

1.How will the new personal tax regime change our tax planning?

2.Does it make sense to continue with ELSSs now?
3.If we want to go for new tax regime, what to do with existing ELSSs?

His response to his clients:
Many investors are sending WhatsApp messages and seem to be nervous about their ELSS schemes. A lot of discussions in the media about the impact of the new personal tax regime will have on ELSS and other tax-saving instruments are making many investors anxious. To answer the most common question, I would ask investors to not do anything at this point. These are just proposals; nothing has changed as of now. If you have an existing plan in place, please stick to it. Don’t make last moment changes to your investments. Meanwhile, calculate your taxes and find out whether the new tax regime is beneficial to you.

Whether or not the new tax regime is better than the old one or vice-versa is a question which doesn’t have a simple answer. The new regime would work for some, while some would be better off with the older one. The calculations need to be based on whether you have a home loan, an education loan, are you investing for a long term goal, and many such aspects. So, it is not a simple yes or no. I would suggest you either take the help of an experienced person or a financial planner if you are not well-versed with calculations.

Investors who already have their SIPs going on in ELSSs shouldn’t do anything. Understand that Equity Linked Saving Schemes are multi cap funds. These schemes can help you create a corpus for a long term goal. So, stopping your investments, regardless of whether you choose the new or the old regime is not a smart idea. Money saved is money earned. Always remember that. Continue with your existing ELSSs even if you feel the new tax regime is better for you. Treat it like another equity fund. Three years is too short a time horizon to take money out from an equity scheme. Tag it to a long-term goal, and continue to invest in it until you meet the goal.