The Section 80C of the Income Tax Act allows tax deduction of up to Rs 1.5 lakh in a financial year on investments in a few specified instruments. In fact, most salary earners start saving or investing under Section 80C immediately after their first salary. If you are trying to save taxes in this financial year, you can consider investing in tax-saving mutual funds or ELSSs.
Tax -saving mutual funds or Equity Linked Savings Schemes (ELSSs) help you to save income tax under Section 80C of the IT Act. You can invest a maximum of Rs 1.5 lakh in ELSSs and claim tax deductions on your investments every financial year. Are you interested? Before proceeding further, you should first familiarise yourself with ELSSs.
Tax saving mutual funds or ELSSs invest in stocks. Therefore, they have very high risk. You should be aware of this aspect, especially if you are a first-time investor in equity mutual funds. Compared to your usual investments like Public Provident Fund or National Savings Certificate, etc, ELSSs do not offer guaranteed returns. You may even suffer losses in a bad market.
So, why should you invest in ELSSs? One, these schemes have the potential to offer higher returns over a long period. As you know, these schemes invest in stocks. And stocks typically offer higher returns over a long period of time. For example, the ELSS category offered an average return of around 15% over 10 years.
Two, ELSSs have the shortest lock-in period among tax saving investments. Most other investment options under the 80C basket are government-backed investments. They typically come with longer lock-in periods. For example, PPF is a 15-year product that allows partial withdrawals after six years. The NSC is a five-year product. So, if you want access to your money in three years, you should invest in ELSSs. But don’t count on it to offer you great returns in three years. You should always keep in ..
And the third and the most important point to remember is that ELSSs is a great entry point for many investors. Many investors often start with ELSSs and the mandatory lock-in period of three years in these schemes helps them to weather the volatility in the stock market. Once these investors see the rewards coming in, say, five or seven years, they start investing more money in equity schemes.
If you are interested in investing in these schemes, here are our recommended ELSSs you may consider investing in the new year. Here is an update. Axis Long Term Equity Fund and Invesco India Tax Plan Fund have been in the fourth quartile for the last six months. Canara Robeco Equity Tax Saver Fund has been in the third quartile last three months. Watch out for our monthly updates to keep track the performance of your schemes…..Read More
Source By : economictimes
