Section 80C of the Income Tax Act covers various investment avenues. Today, let’s understand one of these avenues in particular. The ELSS or Equity Linked Savings Scheme. How can we maximize ELSS for tax-saving purposes? Let’s take a look.

What is it?

  • ELSS is a type of Equity Mutual Fund that not only earns you good returns, but also saves taxes for you.
  • The average return on this Mutual Fund is 10-15%. The longer you stay invested, the higher the returns.
  • There is no maximum limit on how much you can invest in this avenue.
  • However, the section that grants the tax advantage is limited to ₹1,50,000 for the year.
  • ELSS has a lock-in period of 3 years, which means that you can withdraw (redeem) these funds 3 years after the date of each investment.
  • Pick any 5-star rated fund from Mutual Fund houses like Axis and DSP by going through Value Research Online or any other trusted mutual fund advisory site.

How do I take full advantage of it?

  1. First calculate all the benefits that you have availed so far under Section 80C, like life insurance, employer provident fund and public provident fun
  2. To arrive at your minimum annual investment in ELSS, subtract the figure in (1) from the limit of 1,50,000
  3. Now, divide this minimum annual investment by 12 and ensure to invest this in an ELSS through the SIP option every month
  4. An SIP (Systematic Investment Plan) assists you in building the investing habit as well as averages the highs and lows of the market.

Since we have 3 months to the end of this financial year, you could invest the shortfall in your Section 80C component entirely in this instrument. Take this advantage and maximize ELSS for tax-saving purposes.

Start planning for the next financial year now!

Happy Investing and Happy New Year!

Author Bio - Komal Shivdasani

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