Equity investors tend to be apprehensive about losing money in the market. On the contrary, smart investors are cautious about saving their money and investing them with a long-term perspective. Equity-linked savings scheme (ELSS) of mutual funds are ideal for investors wishing to save tax. It is a mutual fund scheme which invests most of its corpus in the equity or equity-linked products.
The main purpose of ELSS is helping individuals to avail income tax benefits under Section 80C of up to Rs 1.5 lakh a year along with continued growth of fund. Fundamentally, equity investments are subjected to market risk. However, since these funds invest in equity, one has chances of better returns along with tax exemption.
Ideal for young people
ELSS is best recommended for individuals who are starting their career. When earnings are modest, no one would like to go for high risks and hence, it?s best suited to beginners. Again, for people earning good money but who don?t like putting all the eggs in one basket, ELSS is good too. Hence, there aren?t any specific stages where ELSS is the best investment option. ELSS suits everyone wishing to earn good returns and simultaneously save taxes.
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ELSS is a smart way of using one?s savings for financial growth and tax exemption at the same time. If the investments are done properly under the instructions of experienced professionals or aggregators which are available online, one could easily build a good portfolio by including good performing ELSS mutual funds.
ELSS schemes also allow you to do systematic investment with as low as Rs 500 a month. Your savings would turn into investments. This inculcates the habit of saving and investing continuously. Since there is a three-year lock-in period, if you begin your SIP in ELSS, the returns for the SIP amounts would be generated every month after the lock-in period of three years. In fact, SIP in ELSS allows an investor to average his investments. Moreover, there?s no additional taxation on the SIP. It doesn?t burden the wallet by offering the option to invest in small amounts rather than investing a lump sum.
It typically takes one to two working days for investment to be done. Also, there are a few specific nuances involved with the process and knowing them in advance makes the experience of investing in online tax saving schemes better. Before picking the online tax saving schemes, keep in mind that you shouldn?t invest your money in something just for saving tax at the last hour. Make sure your investments are in sync with your financial plans.
Source: Tax Guru