Disclaimer: This story is for informational purposes only and should not be taken as investment advice.'

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With many complicated financial products cluttering the market, making a right investment choice has become very a difficult task.  In an interview with Bivekananda Biswas, Shailesh Kumar, Director- Direct Taxation, Nangia & Co LLP, talks about various investment options.

What are the mutual funds salaried persons should buy for tax savings?

Ans:  For tax savings, investment should be made in “Equity Linked Savings Scheme”, popularly known as “ELSS”.  An ELSS is a diversified equity mutual fund, which complies with conditions prescribed by the Government under Equity Linked Savings Scheme, 2005.  As per the scheme, at least 80% of the corpus is required to be invested in equities. Further, investment in ELSS has a lock in period of 3 years from the date of investment.

What is the right mix of investment (proportion of debt and equity)?

Ans: Typically, when fixed sum of money is required back within a short span of time, investment in debt is preferable.  For long-term investments, equity is preferable. 

The decision/ choice of investment in debt or equity depends on investment horizon (short term or long term), risk-taking capability (generally risk-averse investors avoid equity due to possibility of a downside) and age (generally older people nearing their retirement prefer investing in debt) of the investor.

Who should invest in PPF, or other such schemes?

Ans: Any person who intends to invest money for long term, but with low risk, can invest in PPF. 

Do you recommend a portion of investment in FD?

Ans: In order to have a balanced portfolio, an investor should have portions of investment in all possible options say equity, debt, FD, ELSS, PPF, etc.  to have a complete and diversified investment basket.

What about ELSS and ULIP and what are the tax rates on them?

Ans: While ELSS is a pure investment option, ULIP is a hybrid of insurance cover with some portion going into investments. Both are permitted tax saving schemes under Section 80C.  However, ULIPs generally have high hidden cost (on account of inherent insurance cover) vis-à-vis ELSS.