If you’re keen on making well-planned investments that don’t force you to compromise on tax benefits, ELSS or Equity Linked Savings Scheme is something you just cannot afford to overlook. Although there are all types of investment options that enable you to save taxes, ELSS not just helps you do that but it can create wealth for you by helping you inculcate investment discipline (by investing into ELSS via a Systematic Investment Plan).
Let’s admit it, hardly anyone of us likes paying taxes! After all, it’s not easy to part with one’s hard-earned money. That’s why there are tax saving avenues like Section 80C of the Income Tax Act that can help you save taxes. However, do you think that saving taxes is an end in itself? Or is it means to achieve something more? It’s actually the latter. You can combine wise tax-saving and investment decisions to build long-term wealth for yourself and your family.
Something about section 80 C
Many people think that section 80 C complicates the taxpaying activity and makes things difficult for the taxpayers. However, if looked at closely, this section encourages people to save and invest money. You can avail tax deduction of up to Rs. 150,000 by spending your money on eligible investments.
Equity Linked Savings Scheme is considered a suitable option based on three important parameters – risk factor, possible returns and liquidity.
- As ELSS invests in equities, it gives investors an opportunity to earn their share in the profits of the companies that the fund invests into. As a result, investors have a chance of earning higher returns. The probability of earning better returns from equity-based investments like ELSS has also been validated repeatedly by independent research studies.
- Liquidity is the ability of cashing-out your investments as and when needed. It is always advisable to invest your money into products with shorter lock-in periods to cater to your short-term goals. Among all eligible investments for Section 80C deduction, ELSS has the minimum lock-in time period of 3 years.
- As ELSS is an equity-based investment product, it can deliver potentially higher returns in the long-term. The risk factor is considerably reduced as it is professionally managed. In addition, the risk gets reduced further as the investment gets spread over equities of various companies.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.