How ELSS beats all other tax saving tools

How ELSS beats all other tax saving tools

Paying taxes is sometimes considered a burden as one has to pay them just because one earns a good amount of income. Most citizens of the country do not find taxes viable and therefore even try to evade them. But why should we go underground when we can legally save taxes? Yes, you heard that right as Section 80C of the Income Tax Act, 1961 provides a tax deduction on total taxable income up to an amount equal to Rs 1.5 lakh in a financial year. Among various financial instruments, ELSS is one category of equity mutual funds that offer such a benefit. Accordingly, one can reduce taxes to Rs. 46,350 in one year by investing in the best ELSS funds. So you don’t need to opt for tax evasion, instead invest in the best tax saving securities to avail deductions on your income.

There are several instruments that provide 80C deduction to investors in India which include Fixed Deposits (FD), Public Provident Fund (PPF), National Pension Scheme (NPS), LIC Policy etc. All of them have several advantages but the best among them are ‘ELSS Mutual Funds’. Providing multiple benefits to investors, they help one gain capital appreciation along with tax savings. Here you will find the features of ELSS funds that set them apart from others.

  1. Smallest lock-in period – In case of Equity Linked Savings Scheme (ELSS), the lock-in time is least as compared to other tax saving instruments. One needs to remain invested for only three years in the ELSS schemes to avail the benefits and can redeem the funds immediately after the stipulated time is over.
  2. Tax advantage – Under Section 80C of the Income Tax Act, investors who park their money in ELSS can avail a tax deduction of up to Rs.1.5 lakh per financial year on the total taxable income. By doing this, you could reduce the tax burden to a great extent.
  3. Capital appreciation – By investing the funds in shares and securities, ELSS Mutual Fund Schemes offer an opportunity for capital appreciation over a longer period. As the minimum period of investment in this category is three years, the invested money gets enough chance to make higher profits in the market. Apart from this, fund managers are also given ample time to rebalance investors’ portfolio as required.
  4. Returns without tax – Investments made in the best ELSS funds also provide the benefits of tax-free returns. Interest or dividends earned on the securities are not taxable in the hands of the investors. Moreover, the capital gain received at the time of sale of the funds is completely tax-free. Thus, investors do not have to pay taxes on the income from such investments.
  5. A small investment – The minimum investment amount in case of ‘Share Linked Savings Scheme’ is Rs.500 only. Henceforth, one can start investing with such a small amount to avail the benefits. SIP plan in ELSS makes it convenient for investors to indulge in safe investments regularly and avail tax benefits at the end of the financial year. By doing this, you can achieve your long-term financial goals as well as reduce your tax liability at the same time.
  6. No maximum investment limit – There is no limit for investors to make maximum investment in ELSS funds as in the case of PPF. You can invest as much as you want to gain the advantage of a stock portfolio and earn fortunes over time.

Hence, it is undoubtedly safe to say that ELSS Mutual Funds occupy an important position among all tax saving instruments under Section 80C. Investors who wish to gain the twin benefit of tax savings and capital growth should park their funds in these plans.

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