Things You Should Know About Saving Tax in ELSS Under Section 80C

Equity Linked Saving Scheme (ELSS) are tax saving mutual funds which provide people with investments in those funds of up to Rs. 1.5 lakh to receive a tax break under Section 80C. With ELSS funds, you get the advantage of getting the lowest lock-in among all tax saving investments, which is three years.

Why ELSS?

1. Any deposit from INR 500 to INR 1.5 lakh is available for a tax deduction as per the Income Tax Act Section 80C.

2. It's a three-year lock-in financing, and you can withdraw the whole value after three years.

3. The returns you will get after the maturity of your fund is also not payable. The reason being that after one year lock-in period, investments become tax-free.

4. The funds have Dividend option, under which the investor can dividend even during the lock-in period.

5. There is a tremendous growth opportunity in this fund.

How can you fund in an ELSS stock?

The investor requires to be a KYC Compliant. Then he or she can fund in ELSS like any other mutual fund. You need to fill out the needed details make an online transaction.

The investment can be made in both forms one time and systematic investment plans (SIP). Through SIP, you can transfer the desired amount into funds

The advantage of investing with SIP is that it decreases the risks and volatility resulting from an outbreak in the market.

The only drawback of the ELSS fund is that it’s a risk factor is greater than PPF and NSC expenses.

How to choose a proper ELSS?

1. Thorough and comprehensive research is very essential before investing in an ELSS fund.

2. Check the long-term review of the fund.

3. Take a thorough inspection at the fund's details- the manager's investment strategies, portfolio, investment ratio, and the fund's past performance.

4. As you can not withdraw the fund before its lock-in period is over, you need to review your financial situation before deciding on the suitable fund.

5. You can start investing from a young age. It's advisable to begin investing as soon as you start earning and keep the deposit until a long time so that you return better results and interests during withdrawal.

Tax planning is a very significant phase of Financial Planning and we must approach it holding in mind the bigger picture. There are several sections under the Income Tax Act which we can use to our benefit to save on our expenses of tax.

A lot of us are not informed of the options and invest without really examining if our existing expenses or current have already taken care of the greatest limit we can avail of under this section. This results in over funding in this section when we could have funded in a more proper product to meet our financial goals.

Investments in ELSS mutual fund units suit for deduction under section 80c.  These investments being in equity businesses provide capital recognition in the long term and are likely to exceed the other investments.

Equity Linked Saving Schemes (ELSS) or tax saving mutual fund schemes as they are unless identified as are a common tax saving investment. The primary reason for this demand has been the preamble of Section 80C of the Income Tax Act, from April 1, 2005. This section provides the investor to invest up to Rs 1 lakh in different investment products and get a tax reduction for the same. The list of investment outcomes also includes ELSS.

However, there are several things an investor needs to keep in mind before jump into an ELSS expense.

Section 80 C destroys you for choice: As has been discussed above, ELSS is not the only investment avenue that appears under Section 80C. Other expenses such as Life Insurance, Public Provident Fund (PPF), National Savings Certificates (NSC), Senior Citizen Savings Scheme (SCSS), Post Office Monthly Income Scheme (POMIS) etc also offer a related tax bonus. Then there are necessary payments such as your PF, tuition fees of children and even housing loan payments that are reported under Sec. 80C.

Lock-in of three years: Like all financing avenues under Section 80C, ELSS funds also require a certain lock-in. On the one hand, it promotes long-term investment, which is very necessary while investing in property. And on the other, if you find yourself in a position where you need funds in a crisis, you will have to resort to other means/investments the ELSS stock will be locked to you for three years.

Tax saving schemes take the opportunity of investing in equity: ELSS funds are raised because of good investments as they approve the fund manager to take long-term calls on record of the required three-year lock-in.

The bottom lines?

Whether ELSS or any other investment, do not spend because the investment gives a tax advantage. This will assure that all your investments will be as per your risk contour and goal orientated and not only on for the brief purpose of saving tax.