Tax-Saving In A Panic: January Mistakes That Come Back To Haunt You By March

Delhi-based Samir Kapur always planned to sort out his taxes “next month.” April felt too early. August felt too busy. December disappeared in year-end chaos. Then January arrived and with it, the email from the HR department asking for investment proofs.

With barely two weeks to respond, he did what millions of Indians do every year. He opened his banking app, searched for “tax-saving,” and acted fast. An Equity Linked Savings Scheme (ELSS) fund he hadn’t researched. A tax-saving fixed deposit (FD) without checking returns. A Unit Linked Insurance Plan (ULIP) renewal because it “counts under 80C.” In just 48 rushed hours, Rs 2 lakh vanished from his account, buying him tax relief.

Or so he thought.

By March, the cracks began to show. The ELSS fund lagged peers. The FD barely beat inflation post-tax. The ULIP locked his money for five years with heavy early charges. “Tax-saving should never be driven by deadlines,” says Sanjiv Bajaj, Joint Chairman & MD, BajajCapital. “When decisions are rushed, people often end up locking money into products that don’t align with their goals, liquidity needs, or even their tax regime.”

January isn’t just late, it’s emotionally charged. The pressure to submit proofs flips rational thinking into checklist mode: What qualifies? What’s quick? What finishes my 80C limit?

That’s where mistakes quietly begin.

Mistake #1: Buying for Deductions, Not for Life Goals

An ELSS fund may offer tax benefits, but it’s still an equity investment with a three-year lock-in. Yet January investors rarely ask: Does this suit my risk profile? My time horizon? My existing portfolio?

“Tax efficiency should follow financial planning, not replace it,” Bajaj notes. “The product should make sense even if the tax benefit didn’t exist.”

Mistake #2: Ignoring the New vs Old Tax Regime

One of the costliest oversights is investing under Section 80C without confirming the tax regime. The New Tax Regime, now the default, doesn’t allow most deductions.

Every year, salaried employees lock money into ELSS, PPF, or insurance only to later discover the deduction doesn’t apply to them at all.

“A simple comparison at the start of the year can prevent unnecessary investments,” Bajaj says. “Otherwise, people save tax on paper but lose flexibility in reality.”

Mistake #3: Locking Money Without Thinking About Liquidity

Tax-saving FDs, ULIPs, and PPF come with long lock-ins. In January panic, liquidity is rarely considered.

The irony? Many people later take high-interest personal loans for emergencies while their ‘tax-saving’ money sits inaccessible. “Liquidity is an underrated part of financial wellbeing,” Bajaj points out. “You shouldn’t save tax at the cost of financial resilience.”

Mistake #4: Confusing ‘Tax-Saving’ With ‘Good Investment’

Not all tax-saving products are created equal. Some are solid investments. Others are average products dressed up for March.

Traditional insurance plans and ULIPs often resurface every January because they conveniently fill the 80C gap. But combining insurance and investment usually means compromising on both.

“Protection and wealth creation work best when treated separately,” says Bajaj. “Clarity always beats convenience.”

Mistake #5: Tunnel Vision On Section 80C

January panic often ends once Rs 1.5 lakh under 80C is “done.” But that’s only part of the picture.

Health insurance under Section 80D, NPS under 80CCD(1B), and HRA planning are frequently ignored, leaving meaningful tax savings untapped.

“Smart tax planning is holistic,” Bajaj explains. “It looks across sections, not just at one familiar limit.”

The Real Cost Of January Panic

The real damage isn’t just one bad decision, it’s repetition. Year after year, rushed choices compound into lower returns, tighter liquidity, and avoidable stress. A few percentage points lost annually may feel small but over a decade, they quietly erase lakhs from long-term wealth. The fix isn’t complex. It’s simply earlier.

Plan in April. Compare regimes. Spread investments through SIPs. Document steadily. Use January only to confirm, not to decide. “Tax planning works best when it’s proactive, not reactive,” Bajaj says. “The goal is confidence, not compliance under pressure.” Because the difference between tax-saving and tax-planning isn’t the product you buy in January. It’s the calm you create months before panic ever sets in.