Do You Want to Save Tax? Invest in ELSS!
As the financial year comes to a close…are you having income tax blues? Then this article is for you. Did you know that investing your money in the Equity Linked Savings Scheme (ELSS) is one of the best ways to save on tax? ELSS is nothing but a mutual fund that aggressively invests in equity and equity-related stocks. You may have questions such as how is it different from any other mutual funds, how much can I invest, what are the benefits of ELSS and more. So, let’s discover the answers to these questions together.
The difference that saves you tax
The investment in other mutual funds will not save you tax, but investing your money in ELSS surely will. If you invest up to INR 1.5 lac in ELSS you can claim a deduction from your taxable income under section 80C of the Income Tax Act. However, please remember that most ELSS funds come with a lock-in period of 3 years. There is no upper limit to park your money in ELSS but you will receive tax benefits only up to INR 1.5 lac per year.
Some incredible benefits
- Lucrative returns
The ELSS funds are further invested into equity shares which yield a high return in the long run. Other tax-saving avenues may not provide you with such high returns. Besides, the lock-in period of just 3 years is attractive too.
- Diversification
If you think that ELSS is invested in equity and hence must have limited options making it a risky affair, then think again. Because it enjoys a diversified portfolio as it is invested in equity, across different sectors in large-cap, mid-cap, and small-cap categories which reduces the risk.
- Prudent habit
If you have difficulty in keeping your investment locked in for some time and are always tempted to liquidate them, ELSS will instill financially prudent habits, thanks to the 3 year lock-in period. If you are a beginner and want to get into the habit of investing, ELSS is your best bet.
You should invest in ELSS if:
- Your financial goal is to invest in the equity market to earn high returns and at the same time save on tax. ELSS investment is the best of both worlds.
- You have a high-risk appetite and are willing to park your investment in ELSS at least for 3 years.
- You are looking for the best avenues to save tax and grow your wealth.
Ways to Invest in ELSS
You can choose online or offline platforms to invest in ELSS. If you invest online you can invest through Asset Management Companies (AMCs) or other third-party apps. Investing in ELSS by visiting the branch offices of the fund house is the traditional way of investing and many investors choose this option too. Several brokers will invest in ELSS for you but it will come with some fees. So, you can choose to invest using any of these channels depending on your convenience.
So, this is how ELSS mutual funds will help you save tax. If you want more information, please remember we are just a call away.
