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Paying taxes is sometimes considered as a burden as one has to pay only because he/she earns a good income. Most of the citizens of the country do not find taxes viable and hence they also try to avoid them. But why should we indulge in illegality when we have the option of saving tax legally? Yes, you heard that right, there is a provision for tax deduction under Section 80C of the Income Tax Act, 1961 on total taxable income up to Rs 1.5 lakh in a financial year. Among various financial instruments, ELSS is one of the categories of Equity Mutual Funds which offers such benefits. Accordingly, one can deduct taxes up to Rs. 46,350 in a year by investing in top ELSS funds. Hence, you need not opt for tax evasion, rather invest in the best tax-saving securities to avail deductions on your income.
There are various instruments that provide 80C deduction to investors in India which include Fixed Deposits (FD), Public Provident Fund (PPF), National Pension Scheme (NPS), LIC Policy etc. All of these have many advantages, but the best among them is ‘ELSS Mutual Fund’. By providing several benefits to the investors, they help in achieving capital appreciation along with tax savings. Here you will find the features of ELSS funds that set them apart from others.
- Shortest lock-in period In case of Equity Linked Savings Scheme (ELSS), the lock-in period is the shortest as compared to other tax-saving instruments. One needs to stay invested in ELSS schemes for only three years to avail the benefits and the money can be redeemed immediately after the stipulated time is over.
- tax benefits – As per Section 80C of the Income Tax Act, investors who park their money in ELSS can avail tax deduction of up to Rs 1.5 lakh in a financial year on total taxable income. With this, you will be able to reduce the tax burden to a great extent.
- capital appreciation – By investing the funds in equity stocks and securities, ELSS Mutual Fund schemes provide an opportunity to achieve capital growth over a long period of time. Since the minimum investment period in this category is three years, the invested money gets ample chance to earn higher returns in the market. In addition, the fund managers also get enough time to rebalance investors’ portfolios as per the requirement.
- tax-free return Investing in the best ELSS funds also offers tax-free returns. Interest or dividends earned on securities are not taxable to investors. Moreover, the capital gain realized at the time of selling the fund is completely tax-free. Thus, investors are not required to pay tax on the income generated from such investments.
- invest with small amount In case of ‘Equity Linked Savings Scheme’, the minimum investment amount is Rs.500 only. After this, one can start investing with such a small amount to reap the benefits. SIP plan in ELSS makes it more convenient for investors to make safe investments on a regular basis and avail tax deductions at the end of the financial year. This allows one to achieve long-term financial goals and at the same time reduce tax liability.
- No limit on maximum investment In case of PPF, there is no limit on the maximum investment that investors can make in ELSS funds. You can invest as much as you want to reap the benefits of an equity portfolio and earn money over time.
Hence, it is undoubtedly safe to say that ELSS Mutual Funds hold a significant place among all the tax-saving instruments under Section 80C. Investors looking to get the twin benefits of tax savings and capital appreciation should park their money in these schemes.
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