How ELSS Helps You in Cutting Tax Liability?

Mon, 12 Jun 2023 18:04:26 +0000

The Buyt Desk

If you to invest money in a manner that will help you save tax then equity linked saving scheme could be a smart choice. Under section 80C of the Income Tax Act, 1961 a maximum investment of 1.5lakh can be claimed as a tax deduction. Equity Linked Saving Scheme (ELSS) investment can give you the benefit of a Section 80C deduction. It comes with multiple benefits apart from providing you with a safe option for wealth accumulation and tax deduction.

What is Equity Linked Saving Scheme?

It is the only mutual fund eligible for tax deduction under section 80C provision of the Income Tax Act 1961. In this mutual fund, 65% allocation goes into equity and equity-linked securities like listed shares. It may have some exposure to fixed-income securities as well. The best part of this fund is that it comes with the shortest lock-in period of 3 years as compared to the other investment avenues in section 80C. It allows you to invest as much as you wish, but the tax benefit will be on 1.5 lakh. The scheme has been broadly classified into two types.

Growth Funds – This is a long-term wealth creation platform, and the investor receives the full value at the time of redemption.

Dividend Funds – This has been again divided into Dividend Payout and Dividend Reinvestment. In the first option, Dividend Payout, you get a tax-free dividend. On the other hand, in Dividend Reinvestment, the dividend received is reinvested as a fresh investment.

What are the Upsides of Investing in ELSS Over Other Options in 80C?

The fund offers tax deductions of up to Rs. 1,50,000 a year under the section 80C provision.
It has the shortest lock-in period. The lock-in period of all options in 80C is as follows

Investment	Lock-in Period
Equity Linked Saving Scheme (ELSS)	3 years
National Savings Certificate	5 years
Public Provident Fund	15 years
Employee PF and VPF	More Than 15 years

The return that you earn in ELSS is better than the other investment options

Investment	Estimated Return
Equity Linked Saving Scheme (ELSS)	15-18%
National Savings Certificate	7-8%
New Pension Scheme	8-10%
Public Provident Fund	7-8%
5 Year Bank Fixed Deposit	6-8%

There is no upper capping in ELSS investment. On the other hand, minimum capping depends on the mutual fund house.
It is the only tax-saving investment that offers inflation-beating interest. Also, it is the highest among all other options in section 80C.
It gives twin benefits. You can create wealth while saving tax.

How to Start Investing in ELSS?

Investing in ELSS is easy. You can do it online too. To start, you need to open an account with the fund house of your choice and complete the KYC process there. After the verification, you can invest the following way.

Choose the platform through which you will invest.
In the category, select the option “Tax Saving”.
Select the fund you want to invest in.
Tap on “Invest Now”. Follow the remaining process to start.

The features mentioned make ELSS a better option to save tax and accumulate capital. However, keeping all precautions while selecting the fund house will protect you from risks. A direction from an expert is good if you are doing it for the first time.

Also, ELSS redemption is not tax-free. The long-term capital gain of Rs 1,00,000/year is tax-free. Gain above the limit, attract tax of 10% in addition to applicable surcharge and cess.

The dividend you receive from your investment is added to the overall income and taxed according to the tax slab you fall. Despite all the conditions, it is the best tax-saving option under section 80C of the income tax act.

The post How ELSS Helps You in Cutting Tax Liability? appeared first on .

3 Reasons That Makes ELSS A Smart Investment Choice

Sat, 26 Mar 2022 09:51:18 +0000

The Buyt Desk

Equity-linked Saving Schemes(ELSS) are suited for investors who do not hesitate to take risks for better returns. This is a kind of mutual fund which gives an exposure to equity(share market) with the benefit of tax saving. Therefore, it is called an equity-linked saving scheme.

If you are looking for reasons to invest in ELSS, we give you many. However, the main reason one should invest in ELSS is that this scheme has the potential to pay higher returns as compared to other traditional investments. This scheme invests corpus in stock and offers better returns in the long term.

It has a three-year mandatory lock-in period. However, compared to other options, it is the shortest time. Let’s check other benefits you get by investing in ELSS.

It Gives Tax Benefits – ELSS investment get a tax deduction under section 80C of Income Tax Act. If you invest in ELSS, it will reduce your tax liability by up to Rs 1,50,000. You can invest any amount in ELSS and enjoy great returns, however, 1,50,000 will be tax-free. On the maturity of ELSS, gains upto Rs 1 Lakhs is tax exempted.

You Invest In Equity With Saving – If the stock market has not been in your mind or you are hesitant about investing in it, then ELSS is the right way take the first step. Instead of investing in PPF, ULIP or any other plan that gives a return in the range of 7-8 %, use ELSS for a better post-tax return.Create a diversified portfolio with high-performing companies. Then, give it some time to grow. This way, equity will yield you higher returns.

Develop Investment Habits – You can reap benefits in ELSS when you invest in the scheme for the long term. So, when you are coming to ELSS, get in with a long term aim. If you do not want to invest in a lump sum, start with a small amount and invest in ELSS via SIP. You can start investing in ELSS via SIP with a minimum of Rs 500. Indeed, ELSS has a lock-in period, but that also has benefits to offer. By investing in ELSS for three years every month, eventually, you develop a habit of saving. After three years, ELSS will give you a return every month, and if you acquire a habit of saving from this, it will be a bonus for you.

How To Invest ELSS?

To invest in ELSS, the investor has to be mutual fund KYC compliant. One can choose to invest money online or offline. There are three methods present to invest in ELSS.

Visit the website of the mutual fund company.
Visit the RTA website. (Registrar and transfer agent)
Visit the online mutual fund platform.

One can select any of the options on the website. On any of the above-mentioned websites enter primary details like phone number, email ID and PAN number. The PAN number will automatically confirm whether the investor mutual fund is KYC compliant or not.

For mutual fund KYC complaint investors, the process is simple. One has to select the scheme and payment option based on need. There are two options present to invest, lump sum and SIP.

After entering the required details, pay online using various options.