When the taxman comes knocking at our doors, most of us look for ways to save money. We often ignore ELSS, either unwittingly or wittingly. Equity Linked Savings Scheme, a tax-saving mutual fund that is diversified, is where a large portion of the corpus goes into the equity markets.
You can now invest in ELSS plans through the SIP route. You should note, however, that every investment will have a lock-in period of 3 years starting from the date of the initial investment. ELSS funds offer two options: growth or dividend. The growth option gives you a lump sum amount upon completion of the lock-in period, while the dividend option allows you to receive dividends whenever a fund announces a dividend, even though it is still in lock-in.
ELSS funds are becoming more popular. Let’s see why they could be a good investment.
Enjoy Tax Savings and investment
ELSS offers you double benefits. You also get the market advantage from equity exposure which allows you to multiply your money more quickly while minimizing your taxes through section 80C benefits. Unlike PPF, ELSS can be used as a savings tool. ELSS gives you the opportunity to earn strong returns and save your taxes.
Shorter lock-in Periods in Tax Savings options
ELSS is the most popular instrument with a lock-in period that is only three years. These include NSC (6 years), PPF (15 years), and tax savings FFD (5 years). ELSS has the best liquidity of all options.
Returns that Exceed the standard and are Tax-Free
PPF and ELSS are the only options under section 80C that offer tax-free returns. Moreover, ELSS offers the highest returns due to its market advantage. Taxable returns from NSCs and FDs include the following: ELSS offers the highest returns of all instruments.
Opens up Equity Investments
There are some things you might be hesitant about investing in the mutual fund. ELSS is the best option to start your equity journey if you have never invested directly or indirectly in the equity markets. A small increase or decrease in the market can lead to a bad selling decision. This is why ELSS is so important. ELSS has a lock-in period that lasts three years. This allows you to see clear returns for a period of three years. ELSS has delivered the highest returns of any investment under 80C over the past 20 years.
To save taxes and maximize your returns, you can invest in ELSS tax savings funds via SIP.