Why ELSS is Best when it come to Save your tax.
So, you are ready to invest and thinking what should be the first fund? Well, we have the answer.
The category you should start is ELSS or Equity Linked Savings Scheme Mutual Fund.
Here are the reasons you should start with this fund category –
1. You save up to Rs. 46,800* in taxes each year
That’s right! When you invest in ELSS mutual fund, you can claim the amount invested as a deduction under section 80C. This deduction reduces your taxable income, and therefore you pay less tax.
However, there is a limit — you can claim up to Rs. 1.5 lakh in each financial year, which also happens to be the limit of 80c. So your entire tax saving can be done by investing in these funds.
And the best part — The lock-in period for ELSS mutual fund is 3 years. That’s the shortest lock-in period amongst all tax saving options. So you get access to your money faster.
2. You invest in a diversified equity fund
These funds under the hood are typically multi-cap funds. That means they invest in companies of all sizes and across sectors and therefore have a diversified portfolio.
There go anywhere approach: Also gives the flexibility to change the portfolio composition as per the market conditions and hence they are better equipped to take advantage of emerging opportunities.
A diversified portfolio means the risk is also handled better as your investments are spread out. For all these reasons, multi-cap funds are the ideal fund type for a first-time investor.
So you are investing in the fund category that is right for you.
3. You don’t have to choose between reducing tax and investing for the future
You will no longer have to face this problem of whether to put money to reduce tax burden or invest it for long term goals.
While traditional tax saving options like PPF and NSC allow you to save tax, their returns barely beat inflation.
On the other hand, ELSS funds over a long-term give returns that beat inflation with ease, thanks to the potential of equities.
This allows you to map your investments in ELSS funds to your long term goals like retirement or child’s education.
Here is a table with returns by various tax saving options
4. You have the option to put money every month
ELSS mutual funds give you the flexibility to invest through a systematic investment plan (SIP).
SIPs allow you to invest a fixed sum each month in the ELSS mutual fund of your own choice. An SIP inculcates the saving habit and provides a sense of discipline in you.
To sum it up, ELSS funds give you 3x benefits — you invest for your goals, you don’t pay any tax on the money invested, and you get an investment strategy that is ideal for the first-time investor.
See more details about ELSS funds to invest here and start investing today!