Investing

For many taxpayers, filing Income Tax Returns ends with a small celebration, sometimes because the government owes you money. That refund landing in your bank account feels like a bonus. The temptation? Spending it on gadgets, travel, or festive shopping.

But here’s a smarter thought: What if your refund became the seed money for your early retirement?

Think about it. Your ITR refund is money you weren’t counting on, and it feels like an extra. Redirecting it into investments today could mean a far more comfortable tomorrow. 

Let’s explore why this simple move could transform your financial journey.

Why Start Investing with Your Refund?

1. It’s money you weren’t counting on
   Unlike your monthly salary, this isn’t part of your regular budget. Parking it into investments won’t disrupt your lifestyle; it simply accelerates your wealth creation.
   
2. Compounding Works Best with Time
   A ₹60,000 refund invested today can grow significantly over time. For example, if invested at an average return of 12% annually:
   

• In 10 years → ₹60,000 grows to ~₹11.2 lakh
  
• In 20 years → ₹60,000 grows to ~₹46 lakh
  
• In 30 years → ₹60,000 grows to ~₹1.54 crore
  

Now imagine investing your refund every year and suddenly, you’re sitting on a retirement corpus worth crores, all from money that would otherwise have been spent on short-lived indulgences.

3. Retirement Isn’t as Far Away as It Feels
   With rising life expectancy and inflation, your retirement fund needs to be bigger than ever. Waiting until your 40s or 50s to get serious will leave you scrambling. Small steps now make a huge difference later.

The Hidden Danger of Spending Refunds

Every year, countless middle-class families burn through refunds on short-term pleasures. A new phone, festive shopping, or a weekend trip. While these bring joy, they vanish quickly, leaving you with no lasting financial progress.

Meanwhile, inflation quietly eats away at your savings. A refund invested even in a diversified mutual fund portfolio could earn inflation-beating returns, while the same amount spent impulsively only widens your future retirement gap.

Why SEBI-Registered Advisors Matter

Here’s the challenge: with so many investment options like stocks, mutual funds, ETFs, NPS, and gold, how do you decide where to park your refund? 

That’s where SEBI-registered advisors come in.

Unlike self-proclaimed “finance influencers,” SEBI-registered advisors are regulated, qualified, and bound by responsibility. They design investment strategies aligned with your goals, risk appetite, and timelines.

• Goal-based planning: Ensures your refund contributes meaningfully to your retirement fund.
• Risk-managed portfolios: Keep you from chasing fads or unsafe schemes.
• Tax efficiency: Optimizes returns so you’re not handing back gains to the taxman.

Instead of randomly locking your refund in a 7% FD (which inflation and tax will erode), an advisor could channel it into equities, PMS or hybrid products that actually compound wealth.

Action Plan: Turn Refund into Retirement

1. Commit Before You Spend – As soon as the refund hits, transfer it to your investment account. Don’t let it sit idle.
2. Start Investing – Even small lump sums or top-ups each year snowball into meaningful retirement wealth.
3. Diversify Smartly – Don’t put it all into one product. Balance equities, debt, and retirement schemes.
4. Review Annually – With your advisor, ensure your investments stay on track with your retirement goals.

Your refund isn’t just a one-time bonus; it’s a chance to fast-track your retirement savings. Treating it as “fun money” may give momentary joy, but investing it wisely secures peace of mind for decades.

Will you let your refund vanish in instant gratification, or will you partner with a SEBI-registered advisor and let it quietly build your retirement dream?

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Every year, millions of middle-class Indians breathe a sigh of relief after filing their Income Tax Returns. But while you’re celebrating that little tick on the government portal, the biggest expenses are on the way. Why? Because the festive season is around the corner, and that’s when expenses peak, investments get ignored, and wealth leaks happen silently.

So, before the Diwali lights and Christmas sales tempt your wallet, here’s your 9-step post-ITR reality check to keep your finances festive-proof.

1. Review Your Tax Refund or Liability

If you’ve received a refund, don’t rush to spend it. Treat it as surplus capital and redirect it into a mutual fund SIP or short-term debt fund. If you’ve paid more tax than expected, adjust your budget so you don’t enter the festive season already in deficit.

2. Create a Festive Spending Budget

Festive expenses from gifts to gadgets sneak up quickly. Set aside a realistic budget and lock it. This prevents overspending on credit cards, which often results in painful EMIs that haunt you well into the new year.

3. Rebalance Your Portfolio

Markets shift, inflation bites, and your asset allocation from January may no longer be relevant in September. Stock market advisors recommend a quick review—move excess funds from underperforming assets to high-growth opportunities before the year-end.

4. Start a Short-Term Investment for Festive Goals

If you plan to buy gold or make a big purchase, don’t let it all come from savings. Consider short-duration funds or liquid ETFs that grow your idle cash slightly faster than an FD while keeping it accessible.

5. Check Your Emergency Fund

Festive cheer should not come at the cost of financial security. Make sure you have at least 6 months of expenses in liquid form. Advisors often say—celebrations shouldn’t eat into your safety net.

6. Track Hidden Expenses

Subscriptions, EMIs, and impulse buys leak money each month. Plug these in before the festive season hits. Cancel unused subscriptions and redirect the savings into a SIP—you’ll thank yourself in a year.

7. Protect Yourself with Insurance

The festive season often coincides with higher travel and health risks. Review your term insurance and health insurance policies to ensure your family is fully protected.

8. Use Tax-Saving Investments Early

Don’t wait for March to scramble into ELSS or PPF. Post-ITR is the perfect time to start spreading your tax-saving investments across the year, reducing last-minute stress.

9. Consult an Advisor Before Big Decisions

Whether it’s investing your refund, rebalancing your portfolio, or planning large festive purchases, a qualified stock market advisor helps you avoid costly mistakes. The difference between a DIY approach and professional advice could mean the difference between stagnant savings and inflation-beating growth.

Final Word

ITR filing isn’t the finish line; it’s the starting point of smarter money moves. As the festive season approaches, expenses will rise, temptations will multiply, and only those who prepare in advance will protect and grow their wealth.

👉 Don’t just celebrate this festive season, invest in it. A conversation with a stock market advisor today could make all the difference tomorrow.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

If you ask most middle-class Indians where their salary goes, the first answer is rent, EMIs, and household bills. But the truth is, it’s not just the big-ticket spends that drain your savings. It’s the quiet, recurring leaks that eat away at your wealth—month after month, year after year.

Here’s a breakdown of the 13 most common middle-class money leaks in 2025, how much they really cost you, and how to plug them before they turn into lifelong wealth killers.

1. Food Delivery Fees & Impulse Orders

Those ₹60 “convenience charges” on Swiggy and Zomato don’t look scary individually. But add ₹200/week, and that’s over ₹10,000 a year. Redirected into investment through a SEBI-registered advisor, that’s lakhs over 20 years.

2. Unused OTT Subscriptions

Hotstar, Netflix, Amazon Prime, SonyLIV – if you’re paying for four, chances are you actively use one or two. Unchecked, these subscriptions silently chew away ₹500–1,000 monthly.

3. Gym Memberships You Don’t Use

The “new year, new me” gym subscription is one of the world’s biggest financial leaks. If you’re not going regularly, cancel and invest that ₹2,000/month instead.

4. Idle Savings in Low-Interest Accounts

Leaving ₹1–2 lakh in a 3% savings account is like burying cash. Post-tax, post-inflation, you’re losing money. A registered investment advisor can guide you to move that idle money into liquid funds or short-term debt funds while keeping it accessible.

5. Credit Card Late Fees

₹1,000 late payment fee + 36% annual interest is a financial black hole. Automating payments is free. Not doing so is one of the costliest middle-class mistakes.

6. EMIs for Gadgets

Buying a new phone every year on EMI isn’t a lifestyle upgrade; it’s a wealth downgrade. A stock market advisory firm would tell you: redirect that EMI into mid-cap stocks or SIPs, and let compounding upgrade your future.

7. Impulse Online Shopping

“Lightning Deal” and “Big Billion Days” are traps. ₹500 here, ₹2,000 there adds up to tens of thousands annually. A best stock advisory company can help you turn those savings into investments instead of cardboard deliveries.

8. Over-Insurance & Wrong Policies

ULIPs, endowment plans, and overpriced premiums drain more money than they return. Instead, opt for term insurance + investments guided by SEBI-registered investment advisory services.

9. Vehicle Maintenance Overkill

Servicing a car more than needed, or over-accessorizing, is another leak. ₹10,000 extra per year over 15 years = ₹1.5 lakh lost, without even counting compounding.

10. Festive Season Overspending

Diwali, weddings, and New Year splurges can burn through one month’s salary. Instead of going all in on consumption, allocate 30% of your festive bonus into SIP investments or index funds.

11. Dining Out “Quick Bites”

₹200–₹500 “small meals” multiple times a week = ₹4,000–₹5,000 monthly leak. That’s ₹60,000/year, not working for you.

12. Unclaimed Tax-Saving Investments

Not fully using Section 80C/80D deductions is like leaving free money on the table. A financial planner or share market advisory company can help you optimize taxes while investing smartly.

13. FD Returns Eaten by Inflation

The biggest silent leak: parking all savings in a 7% FD. After 30% tax and 5–6% inflation, your real return is ~0%. A stock investment advisor will show you why even conservative index funds beat FDs comfortably.

The Compounding Cost of Leaks

Let’s quantify one small leak:

• ₹3,000 wasted every month = ₹36,000 per year.
  
• If invested in Nifty 50 for 20 years:
  
  • At 10% CAGR (conservative): ~₹21.7 lakh
    
  • At 12% CAGR (base case): ~₹27.6 lakh
    
  • At 14% CAGR (optimistic): ~₹35.2 lakh
    

That’s how much you lose not just ₹36,000/year, but the compounding potential of ₹20–35 lakh.

Summary & Takeaway

The middle class doesn’t lose wealth because of low income; it loses because of undetected money leaks.

• Cancel what you don’t use (subscriptions, gym).
  
• Automate what costs you extra (bills, EMIs).
  
• Redirect leaks into SIPs, equity funds, or debt instruments.
  
• Consult a SEBI-registered advisor or investment advisory firm to maximize compounding.
  

The real difference between paycheck-to-paycheck living and wealth creation isn’t luck. It’s plugging leaks and letting compounding do the heavy lifting.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

For generations, Fixed Deposits (FDs) have been the gold standard of “safe” investing for the Indian middle class. A guaranteed 7% return sounds reassuring, especially in an uncertain economy. Banks market them as a fortress for your savings, no risk, assured income, peace of mind.

But here’s the uncomfortable truth: that 7% isn’t really 7% once you factor in taxes and inflation. What feels like a cushion today could quietly be eroding your wealth tomorrow.

The Post-Tax, Post-Inflation Reality

Let’s crunch the numbers.

• FD Interest Rate: 7%
  
• Tax Deduction (30% slab): ~2.1% gone
  
• Effective Return after Tax: 4.9%
  
• Average Inflation (2025 estimate): 5–6%
  

Do the math, and you’ll see you’re effectively making zero or even negative returns. Your money isn’t growing; it’s losing purchasing power.

So while your bank balance looks bigger year after year, what you can actually buy with that money is shrinking. That dream of upgrading your car, funding your child’s higher education abroad, or even retiring comfortably? It’s slipping further away with every “safe” FD renewal.

The Illusion of Safety

FDs feel safe because they protect your principal. But safety isn’t about having the same number on your bank statement; it’s about safeguarding your future lifestyle. If inflation and taxes are eating into your returns, then FDs are only giving you a false sense of security.

Here’s the kicker: While you’re stuck at 4-5% effective returns, inflation-driven assets like real estate, equities, and even gold are compounding much faster. Over 10-15 years, the wealth gap between FD investors and market-savvy investors becomes a chasm.

Why You’re Falling Behind Without Realizing

Imagine two people start with ₹10 lakh today:

• Person A puts it in a 7% FD. After 10 years, they might see ~₹20 lakh in the account, but the inflation-adjusted value is far less, closer to ₹13–14 lakh in today’s money.
  
• Person B invests smartly with diversified, inflation-beating options, averaging 11–12% returns. In 10 years, their portfolio could touch ₹28-30 lakh.

That’s a ₹10 lakh gap simply because one played it “safe” and the other played it smart.

Why You Need Guidance, Not Just FDs

Most investors stick with FDs because they don’t know where else to turn. Markets feel risky, options feel confusing, and nobody wants to gamble with hard-earned money. But here’s the truth: it’s not about gambling – it’s about strategy.

A good investment advisory does three things that FDs can’t:

1. Customize your portfolio based on your goals, age, and risk appetite.
2. Balances risk and reward with asset diversification (equity, debt, gold, global funds, etc.).
3. Keeps you ahead of inflation, ensuring your money actually grows in real terms.

Don’t Settle for Stagnation

Every year you lock money into FDs, you’re silently letting inflation steal your dreams. The world won’t wait. Opportunities in equity markets, mutual funds, and alternative investments are creating wealth for those who move beyond “safe” illusions.

The question is: Do you want your money to simply sit, or do you want it to work harder than you do?

It’s time to rethink “safety.” With the right investment advisor by your side, you can protect your capital and grow it meaningfully. Don’t wait until your FDs mature by then; the opportunity might have already slipped away.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Filing your Income Tax Return (ITR) each year feels like a necessary evil. You wrestle with Form 16s, TDS certificates, and salary slips, and finally breathe a sigh of relief when the confirmation email arrives. But here’s the real truth: filing ITR is just a compliance step. What you do after filing is what truly shapes your financial future.

Let’s dissect the middle-class salary, an autopsy of money flows in 2025, and see how refunds, savings, and investments should actually be managed.

Where Does Your Money Really Go?

If you earn ₹12–15 lakh annually in 2025, here’s how your salary often “dies” every month:

• 30 – 35%: House rent or EMIs
  
• 20 – 25%: Lifestyle spends (Swiggy, Netflix, EMIs on gadgets, weekend getaways)
  
• 15 – 20%: Children’s education, healthcare, parents’ needs
  
• 10 – 12%: Insurance premiums, PF, and forced savings
  
• 5 – 7%: Actual investments
  
• Remainder: Vanishes quietly into UPI swipes, subscription auto-debits, and festive overspending

When you file your ITR, this picture becomes brutally clear: most Indians don’t have an income problem – they have an allocation problem.

Refunds Are Not Free Money

Many salaried taxpayers cheer when they see an ITR refund. But let’s be honest, your refund is not a “bonus” from the government. It’s your own money that you overpaid in advance tax or TDS.

Instead of parking it in a 7% FD, which shrinks to ~5% post-tax and zero after inflation, you need to ask: Can this refund actually create wealth?

This is where SEBI-registered investment advisory firms step in. A registered investment advisor is bound to act in your best interest, unlike random social media tips. They can help you:

• Allocate refunds into equity SIPs or index funds
  
• Explore mid-cap stocks or large-cap stocks with potential
  
• Understand high-growth stocks vs high-risk best penny stocks
  
• Diversify across mutual funds, ETFs, and debt instruments

Why Advisory Investment Services Matter

The Indian middle class loses lakhs over decades, not because they don’t save, but because they don’t invest wisely.

A stock market advisory helps answer questions like:

• Should you start a SIP investment or go lump-sum?
  
• What is stock market volatility, and how do you manage it?
  
• How much equity vs FD should you hold at age 35 vs 45?
  
• Which tax-efficient options beat FDs long term?

Imagine this: Your ₹1 lakh refund left in a savings account = ₹1 lakh in 2045. 

The same ₹1 lakh in equities compounding at 12% CAGR = ₹9.6 lakh. 

That’s the power of compounding you miss without guidance.

Post-ITR Action Plan for Middle-Class Salaried in 2025

1. Do a salary autopsy: Use a budgeting app or Excel to see where your income leaks.
   
2. Redirect refunds smartly: Don’t blow it on gadgets; invest in SIPs or ETFs.
   
3. Seek professional help: The best Indian stock market advisor tailors advice for your tax slab and goals.
   
4. Use calculators: A SIP calculator, CAGR calculator, and compound interest calculator show you the real power of long-term investing.
   
5. Review insurance & debt: Don’t overpay premiums or carry costly credit card debt.

Final Word

Filing ITR is not the end. It’s a financial mirror. Once you see where your salary dies each year, you can revive it with investment advisory services.

The middle-class trap is real, but with the right share market advisory services, your money doesn’t just pay bills. It builds wealth.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Investing in mutual funds is a smart way to grow your wealth, but with so many options available, choosing the right fund can be confusing. Among the most talked-about categories today are multi cap funds and flexi cap funds. While both belong to the equity fund category, they follow different investment strategies and suit different kinds of investors.

In this article, we will explore the concept of multicap vs flexicap within the broader landscape of different types of mutual funds, understand how each fund type operates, compare their key differences, and help you determine which one aligns best with your financial goals.

What Are Multi Cap Mutual Funds?

Multi-cap mutual funds are a type of equity fund that invests in companies across all market capitalisations, large-cap, mid-cap, and small-cap stocks. However, there’s a specific rule set by the Securities and Exchange Board of India (SEBI) for these funds.

SEBI Mandate:

As per SEBI’s 2020 guidelines, multi cap funds must invest:

• At least 25% in large-cap stocks
  
• At least 25% in mid-cap stocks
  
• At least 25% in small-cap stocks
  

This rule ensures a minimum diversified exposure to all three market segments. The remaining 25% can be allocated at the fund manager’s discretion.

Who Should Invest?

Multi cap funds are ideal for investors looking for:

• A balanced exposure to various market caps
  
• Moderate risk with growth potential
  
• A medium to long-term investment horizon
  

These funds offer stability through large-cap stocks and growth potential through mid and small-cap companies. If you’re someone who wants a good mix without actively managing your portfolio, multi-cap funds are worth considering.

What Are Flexi Cap Mutual Funds?

Flexi cap mutual funds, as the name suggests, are flexible in their approach. They can invest across large-cap, mid-cap, and small-cap stocks without any minimum allocation requirement. The fund manager decides the asset allocation based on market conditions, valuation opportunities, and the fund’s strategy.

Key Features:

• No rigid allocation mandate unlike multi cap funds.
  
• Entire portfolio can be in large-cap, mid-cap, or small-cap, depending on market outlook.
  
• Offers high flexibility for fund managers to optimise returns.
  

Who Should Invest?

Flexi cap funds are suitable for investors who:

• Want professional fund management with market-driven strategies
  
• Have a higher risk appetite
  
• Are looking for potentially higher returns during market upcycles
  

Because these funds can swiftly move across market caps, they can take advantage of short-term opportunities and navigate market volatility better.

Multi Cap vs Flexi Cap: Key Differences Explained

Understanding the flexi cap vs multi cap debate is easier with a direct comparison:

Feature	Multi Cap Funds	Flexi Cap Funds
SEBI Mandate	Minimum 25% each in large, mid, and small-cap	No fixed allocation
Flexibility	Limited due to regulatory structure	High, based on market conditions
Risk Level	Moderate due to balanced allocation	Can be high or low depending on allocation
Fund Manager Freedom	Restricted to meet allocation norms	Full freedom in asset allocation
Suitability	Ideal for balanced investors	Ideal for active, growth-focused investors

Risk-Return Profile: Which One Performs Better?

When comparing multicap vs flexicap, the key differentiator lies in risk and returns.

• Flexi Cap Funds tend to perform better during bullish markets. Fund managers can move more funds into mid and small-cap stocks, which usually outperform large-cap stocks in rising markets.
  
• Multi Cap Funds may lag slightly in such cycles because they are required to maintain a fixed 25% allocation across segments, regardless of market opportunities.
  

However, in bearish markets or when small-cap stocks underperform, multi cap funds might provide better downside protection due to their diversified and regulated approach.

So, Flexi Cap = Higher returns + higher risk;
Multi Cap = Balanced returns + lower risk.

Ideal Investor Profile for Multi Cap vs Flexi Cap

To choose the right fund, match your investment profile with the fund’s characteristics:

Multi Cap Funds:

• Age Group: 30-55 years
  
• Investment Style: Conservative to moderate
  
• Horizon: Medium to long term (5+ years)
  
• Preferred Mode: SIP is recommended for rupee cost averaging
  
• Risk Appetite: Medium
  

Flexi Cap Funds:

• Age Group: 25-45 years
  
• Investment Style: Aggressive
  
• Horizon: Long term (7+ years)
  
• Preferred Mode: SIP and Lumpsum during market corrections
  
• Risk Appetite: High
  

Understanding your goals, risk tolerance, and investment horizon can help you choose between multi cap funds and flexi cap funds wisely.

Taxation Rules for Multi Cap and Flexi Cap Funds

Tax rules for both these fund types fall under the umbrella of equity mutual funds, so taxation is similar.

• Short-Term Capital Gains (STCG): If sold within 12 months, gains are taxed at 15%.
  
• Long-Term Capital Gains (LTCG): If sold after 12 months, gains above ₹1 lakh are taxed at 10% without indexation.
  

These rules apply uniformly to both multi cap funds and flexi cap funds, making taxation a non-factor in fund selection.

Which Is Better in Volatile Markets?

During market volatility, having the freedom to quickly reallocate capital becomes an advantage.

Flexi Cap Funds:

• With the support of stock advisory services, fund managers can lower exposure to small or mid-cap stocks during a market downturn and shift investments to more stable large-cap stocks for better risk management.
• This flexibility can protect your money and give better returns than fixed funds during uncertain times.

Multi Cap Funds:

• The rigid allocation structure can be a limitation during volatile phases.
  
• For example, even if small caps are underperforming, the fund must maintain a 25% allocation, which can drag down returns.
  

Multi Cap vs Flexi Cap Returns: Historical Performance Overview

Over the past three years (2021-2024), multi-cap funds have given an average return of about 21.38%, while flexi-cap funds have returned around 17.97%. During this time, nine multi-cap funds were available. Among them, Nippon India Multi Cap Fund performed the best with a return of 28.03%, followed by ICICI Prudential Multicap Fund at 22.81%. On the lower side, Aditya Birla Sun Life Multi-Cap Fund delivered the least with 18.44%.

In comparison, about 27 flexi-cap funds were active during the same period. The top performer was JM FlexiCap Fund, which gave a return of 27.85%, followed by HDFC Flexi Cap Fund with 26.41%. The lowest performer among flexi-cap funds was UTI Flexi Cap Fund, with a return of just 7.83%.

Source: Economic Times

While past performance doesn’t guarantee future results, it offers a glimpse into how these funds behave in different cycles.

Rising phase	Flexi-cap funds	Multi-cap funds
April 30 2021 to October 31, 2021	24.10%	28.50%
February 28, 2023 to July 31, 2023	18.00%	20.60%
January 31, 2024 to April 30, 2024	5.70%	5.40%
May 31, 2024 to September 30, 2024	16.60%	17.50%
Falling phase
March 31, 2022 to June 30, 2022	-11.00%	-11.20%
November 30, 2024 to February 28, 2025	-13.80%	-15.50%

Source: Valueresearch

How to Choose Between Multi Cap and Flexi Cap Funds?

Use this simple decision-making checklist:

Choose Multi Cap Funds if:

1. You prefer regulated diversification
   Multi cap funds invest across large, mid, and small caps, offering balanced diversification as mandated by SEBI for risk management.
   
2. You’re a beginner or moderately risk-tolerant
   These funds are ideal for investors with limited experience or medium risk appetite, offering exposure to all market segments safely.
   
3. You want to avoid timing the market
   Multi cap funds automatically balance investments across segments, saving you from the challenge of predicting market highs and lows.
   
4. You seek consistency in returns
   With exposure to different market caps, these funds help reduce volatility and aim for stable, long-term performance across market cycles.
   

Choose Flexi Cap Funds if:

• You trust a fund manager’s judgement
  Flexi cap funds rely on the fund manager’s skill to dynamically shift between market caps based on evolving opportunities.
  
• You want to capitalise on market opportunities
  These funds allow flexible allocation, helping capture emerging trends or sectoral momentum as market conditions change without restriction.
  
• You have a long investment horizon
  Flexi cap funds perform better over time, benefiting from market cycles if held for five years or more consistently.
  
• You can stomach some volatility for higher potential gains
  These funds may take bold bets, leading to short-term ups and downs, but aim for superior long-term wealth creation.
  

Conclusion

Both multi cap and flexi cap mutual funds come with distinct advantages. To enjoy the full benefits of mutual funds, it’s essential to align your choice with your investment goals, risk tolerance, and desired portfolio flexibility. Choose multi cap funds if you prefer balanced exposure and steady performance. Opt for flexi cap funds if you’re comfortable with dynamic allocation and aiming for higher returns.

Ultimately, both fund types offer many benefits, including diversification, professional management, and long-term growth potential, making them smart options for retail investors who prefer simplicity over direct stock picking or the mutual fund vs ETF debate.

FAQs 

What is the main difference between Multi Cap and Flexi Cap funds?

The key difference is in asset allocation. Multi cap funds have a SEBI-mandated allocation (25% each in large, mid, and small caps), while flexi cap funds have no fixed allocation and give the fund manager full flexibility.

Which fund type is better for beginners?

Multi cap funds are more suitable for beginners as they provide balanced exposure across the market and do not rely heavily on timing or fund manager discretion.

Are both Multi Cap and Flexi Cap equity mutual funds?

Yes, both are equity mutual funds. They invest in shares of listed companies across various market caps but differ in how they allocate funds among those companies.

Can I switch from Multi Cap to Flexi Cap?

Yes, you can switch between the two. This can be done via a fund switch option if your platform allows it or by redeeming units from one and reinvesting in another.

Which has better returns – Multi Cap or Flexi Cap?

Multi-cap and Flexi-cap funds both could offer good returns, but their risk profiles differ. Multi-cap funds are more volatile due to mandatory small and mid-cap exposure, while Flexi-cap funds offer flexibility, stability, and suit moderately risk-tolerant investors better.

What are the risks associated with these funds?

Both multi-cap and flexi-cap funds carry market risks, but flexi-cap funds have some extra challenges. Their performance depends more on the fund manager’s decisions, which may not always be right. If too much is invested in one type of stock, like small or mid-caps, the fund can become risky. Multi-cap funds are more balanced by rule, but they also invest in small-caps, which can hurt returns when markets fall.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

When planning your investments to save taxes and build wealth, two popular options often come up, NPS and ELSS. Both options are eligible under Section 80C of the Income Tax Act and offer long-term benefits. However, they differ significantly in terms of structure, lock-in period, risk, and returns.

In this article, we will break down everything you need to know about NPS vs ELSS, the National Pension Scheme and Equity Linked Savings Scheme to help you make the right financial decision.

What Is NPS?

The National Pension Scheme (NPS) is a retirement-focused investment plan launched by the Government of India. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The purpose of the NPS scheme is to provide a steady income after retirement by encouraging long-term, disciplined savings.

Investing in NPS allows individuals to systematically build a retirement corpus over the years, with the added advantage of tax benefits under Section 80C and 80CCD(1B). 

Key Features of NPS:

• Structure: NPS is a market-linked product where contributions are invested in equity, corporate bonds, and government securities.
  
• Suitability: Ideal for individuals who want to build a retirement corpus with moderate risk.
  
• Lock-in Period: Funds are locked in until the subscriber turns 60 years old.
  
• Minimum Investment: ₹500 for Tier I accounts and ₹1,000 per year minimum contribution.
  
• NPS Interest Rate: The NPS interest rate varies based on market performance and allocation choices, typically ranging between 8% to 10% annually.
  

What is National Pension Scheme Best For?

If you are looking for retirement-oriented savings with long-term benefits, then understanding what is National Pension Scheme becomes crucial. It is a disciplined, structured, and government-backed investment vehicle. When comparing NPS vs SIP, NPS offers more stability and retirement-focused tax advantages.

What Is ELSS?

ELSS (Equity Linked Savings Scheme) is a type of mutual fund that qualifies for tax deduction under Section 80C. It primarily invests in equities and equity-related instruments, offering high return potential with market-linked risk. In the NPS vs ELSS debate, ELSS is preferred for short-term liquidity and higher growth.

Key Features of ELSS:

• Lock-In Period: Just 3 years, which is the lowest among all Section 80C options.
  
• Market Exposure: ELSS has a high exposure to equities, which means it can offer higher returns but comes with market volatility.
  
• Fund Structure: Managed by professional fund managers, these funds invest across sectors and market caps.
  

Who Should Invest in ELSS?

ELSS is suitable for those who:

• Can handle short-term market fluctuations,
  
• Want high returns,
  
• Need liquidity in the medium term.

Key Differences Between NPS and ELSS

Here’s a comparison table to help you understand the major differences between NPS vs ELSS:

Feature	NPS	ELSS
Type of Investment	Retirement-focused pension plan	Equity mutual fund with tax-saving benefits
Lock-in Period	Till age 60	3 years
Tax Benefits	Up to ₹2 lakh (₹1.5 lakh under 80C + ₹50k under 80CCD(1B))	₹1.5 lakh under 80C
Risk Profile	Moderate (Equity + Debt allocation)	High (Equity-focused)
Returns	8–10% (market-linked but lower volatility)	12–15% potential (but volatile)
Liquidity	Low (withdrawal restrictions before 60)	High after 3 years
Exit Rules	60% lump sum + 40% mandatory annuity	Full withdrawal allowed after 3 years
Ideal For	Long-term retirement planning	Medium- to long-term wealth creation

Tax Benefits: NPS vs ELSS Under Section 80C and Beyond

Both NPS and ELSS are popular primarily because they help reduce your tax burden.

ELSS Tax Benefits:

• Investment up to ₹1.5 lakh qualifies for deduction under Section 80C.
  
• Returns (LTCG) above ₹1 lakh are taxed at 10% without indexation.
  

NPS Tax Benefits:

• Investment up to ₹1.5 lakh qualifies under Section 80C.
  
• Additional deduction of ₹50,000 is available under Section 80CCD(1B), making the total tax saving ₹2 lakh.
  
• Partial withdrawals (up to 25% for specific purposes) are tax-free.
  
• At retirement, 60% of the corpus is tax-free, while 40% must be used to buy an annuity (which is taxable as income).

If maximum tax saving is your goal, the NPS scheme offers greater benefits, especially with the additional ₹50,000 deduction under Section 80CCD(1B), over and above the ₹1.5 lakh allowed under Section 80C. This makes NPS one of the most tax-efficient retirement investment options available.

However, if you prioritise liquidity, shorter lock-in periods, and ease of access to your money, ELSS may be more suitable. 

An important feature of NPS that adds further flexibility is the porting of NPS annuity. This means that at the time of retirement, you are not bound to stick with the original annuity service provider chosen when you joined the scheme. Instead, you have the option to port your NPS annuity to another provider offering better terms, such as higher monthly payouts, better service, or more favourable retirement benefits. 

Returns & Risk Profile Comparison

NPS Returns & Risk:

• NPS interest rate varies based on chosen asset allocation.
  
• Government employees typically have more debt exposure.
  
• Returns are relatively stable due to diversified asset allocation.
  

ELSS Returns & Risk:

• Since ELSS invests 100% in equities, it carries higher risk.
  
• Returns can be high—12% to 15% or more—but can also fluctuate heavily based on market performance.
  

NPS is ideal for conservative investors aiming for retirement. ELSS is suited for aggressive investors aiming for higher short-to-medium-term gains.

Lock-In Period and Withdrawal Flexibility

One of the biggest decision-making factors in the NPS vs ELSS comparison is liquidity.

NPS Lock-in:

• Locked until the age of 60.
  
• After 60: You can withdraw 60% as a lump sum (tax-free) and invest 40% in an annuity (taxable).
  
• Partial withdrawal (up to 25%) is allowed only after 3 years, and only for specific purposes.
  

ELSS Lock-in:

• Only a 3-year lock-in period.
  
• Post that, you can redeem or switch at any time.
  
• Offers complete flexibility for investors who need money in the near future.
  

Which Is Better for Long-Term Wealth Creation?

NPS for Long-Term Wealth:

• Helps in disciplined retirement planning:
  The NPS scheme encourages consistent, long-term contributions, helping individuals systematically build a secure retirement corpus with government oversight.
• Low volatility, moderate growth:
  With a balanced mix of equity and debt, NPS delivers steady returns while minimizing market-related fluctuations for safer wealth accumulation.
• Lock-in ensures long-term investment horizon:
  The mandatory lock-in till age 60 discourages premature withdrawals, promoting long-term financial discipline and ensuring funds are reserved for retirement needs.

ELSS for Long-Term Wealth:

• Can generate higher returns:
  ELSS invests in equities, offering potential for higher long-term returns compared to traditional tax-saving options like PPF or FD.
• More suited for wealth creation goals:
  With just a 3-year lock-in, ELSS supports medium-term goals, helping investors grow wealth for major life milestones efficiently.
• Comes with a higher risk:
  ELSS returns depend on stock market performance, making it riskier and more volatile compared to fixed-income or debt-based instruments like NPS.

If your primary goal is a secure post-retirement income, go for NPS. But if your focus is on building wealth over the next 5–10 years, ELSS might be better.

ELSS vs NPS: Which One to Choose Based on Your Investment Goal?

Your investment goal should dictate your choice between NPS vs ELSS. Here are some investor personas:

1. Investor A – Age 28, Software Engineer

Goal: Retirement Planning
With a long investment horizon, Investor A chooses the NPS scheme to build a secure retirement corpus. The additional tax benefit of ₹50,000 under Section 80CCD(1B) enhances savings. Since retirement is decades away, locking funds till 60 isn’t an issue. NPS offers disciplined investing with moderate returns and low volatility, making it ideal for a stable financial future.

2. Investor B – Age 35, Entrepreneur

Goal: Tax-Saving + Liquidity
As an entrepreneur with unpredictable income, Investor B prefers ELSS for its flexibility and short 3-year lock-in. The potential for high returns through equity exposure fits well with her growth-oriented mindset. ELSS provides tax benefits under Section 80C while allowing partial liquidity, helping her meet short- to medium-term financial goals like business expansion or personal milestones.

3. Investor C – Suresh, Age 45, Business Owner

Goal: Mix of Retirement and Tax Planning
Suresh opts for both NPS and ELSS to strike a balance between stability and growth. He uses NPS for disciplined retirement savings and additional tax deductions, while ELSS helps generate higher returns with a shorter lock-in. This dual strategy diversifies his portfolio, reduces risk, and maximizes tax benefits—ideal for someone approaching retirement yet still aiming for wealth creation.

Key Takeaway:

• Choose NPS if your investment goal is retirement:
  NPS offers structured, long-term savings with tax benefits, ideal for building a secure retirement corpus with low-to-moderate risk exposure.
• Choose ELSS if you want higher returns with more liquidity:
  ELSS provides equity-based growth, a short 3-year lock-in, and quick access to funds—perfect for medium-term financial goals and flexibility.
• Choose both for a balanced, tax-efficient portfolio:
  Combining NPS and ELSS ensures tax savings, diversification, stable retirement income, and equity-driven growth for short- and long-term wealth creation.

Conclusion

The NPS vs ELSS debate doesn’t have a one-size-fits-all answer, as each option offers unique benefits based on your financial goals, risk tolerance, and investment horizon. NPS is a structured, government-backed plan that suits individuals focused on long-term retirement planning, while ELSS is a market-linked mutual fund designed for those seeking higher returns with a shorter 3-year lock-in period. 

If your primary goal is a secure retirement, the NPS scheme is the better fit. On the other hand, if you’re aiming for aggressive growth over 3–5 years, ELSS may be more suitable. For many investors, using shares advisory services can also help create a balanced strategy that includes both NPS and ELSS, allowing for effective tax savings, portfolio diversification, and long-term wealth creation.

FAQs 

Can I invest in both NPS and ELSS?

Yes, you can. In fact, combining both helps you diversify your investments. ELSS offers high growth potential, while NPS ensures retirement safety. Plus, you can claim up to ₹2 lakh in tax deductions.

Is NPS better than ELSS for retirement planning?

Yes, NPS is specifically designed for retirement planning. It locks your funds till 60 and offers a structured withdrawal system. ELSS, while useful, is more suitable for general wealth creation.

Which gives better returns – NPS or ELSS?

ELSS has the potential for higher returns as it’s fully invested in equity. NPS, with its mixed allocation of equity and debt, offers more stable but slightly lower returns.

Is ELSS eligible under Section 80C?

Yes, investments in ELSS up to ₹1.5 lakh are eligible for deduction under Section 80C of the Income Tax Act.

How do I exit from NPS and ELSS?

In NPS, after age 60, you can withdraw 60% tax-free and must buy an annuity with 40%. In ELSS, you can fully withdraw your money after the 3-year lock-in period, with no restrictions.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Infosys has come into the spotlight once again as its board is set to meet on September 11, 2025, to discuss a new share buyback proposal, which could be the company’s fifth buyback initiative. Ahead of this development, the stock has already witnessed strong momentum in the market, with Infosys shares trading around ₹1,499 on the NSE and BSE, up nearly 4.6% in today’s session. The announcement has not only lifted investor sentiment around Infosys but also supported the broader IT index, which posted gains of over 2%.

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Market Momentum This Week

The excitement began as soon as the buyback consideration was disclosed. Infosys shares touched intraday highs of ₹1,495–₹1,496 before settling close to ₹1,499. The rally also extended to other IT majors, with the Nifty IT index reversing its recent losing streak and closing stronger by 1.5–2.3%.

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Why Investors Should Pay Attention

1. Why Buybacks Matter

A share buyback typically means the company buys its own shares, often at a premium. This can:

• Indicate management’s belief that the stock is undervalued.
  
• Reduce the number of outstanding shares, boosting Earnings Per Share (EPS) and return ratios.
  
• Distribute cash directly to shareholders, often reinforcing confidence.
  

2. Infosys’ Buyback Track Record

Infosys isn’t new to buybacks: it previously executed similar programs in 2017, 2019, 2021, and 2022, with the last one worth about ₹9,300 crore at a buyback price of ₹1,850 per share.

3. What’s Behind the Timing?

The timing may have strategic merit. Infosys’ share price is down around 24–28% from its peak, and the wider IT index has also underperformed this year. The buyback could be a move to revive sentiment amid macroeconomic hurdles like U.S. tariffs, visa constraints, and cautious technology spending abroad.

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Why This Matters for You

• If you’re already holding Infosys, the buyback announcement could enhance value through improved EPS or even offer an arbitrage opportunity.
  
• For prospective investors, this moment could signal a tactical entry point, especially if the buyback is sizable enough to lift valuation multiples.
  
• For all investors, it’s a reminder to balance optimism with macro caution—drivers such as global IT spending trends and institutional flows still matter.
  

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Final Thoughts

Infosys’ upcoming board meeting to consider a fifth share buyback has triggered a sharp rally in its stock, bringing it closer to the ₹1,500 mark. The move appears aimed at boosting investor sentiment and delivering excess cash to shareholders. The final details of the buyback—price, size, and method—will determine whether this rally gains further strength, not just for Infosys but also for the broader IT sector.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.