A vast majority of tax-payers choose a tax-saving investment option just weeks or days before the deadline to submit tax receipts. In a hurry to choose a tax-saving investment option, several of these investors purchase insurance plans or choose to invest in National Savings Certificate (NSC) or fixed deposits (FDs). These investors hardly think of considering mutual funds as their tax-saving investment option. Did you know that you invest in mutual funds and still claim the Rs 1.5 lac under Section 80C?
ELSS, or equity-linked savings scheme is a type of mutual fund with tax-saving attributes. ELSS funds invest a majority of their investible corpus (a minimum of 80%) in equity and equity-related securities. These mutual funds offer the dual benefits of tax saving and wealth creation opportunities. Just like any other Section 80C investments, an investor can claim Rs 1.5 lac by investing in tax saving mutual funds. As an investor, you can save your tax outgo up to Rs 46,800 each year by investing in ELSS mutual funds.
This is the apt time to invest in ELSS and be relaxed instead of hurriedly choosing the investment option for you when nearing the deadline. Financial experts and advisors suggest that it is better to plan your tax-saving investments soon and choose the right investment option and set your financial goals accordingly.
ELSS investors have their funds locked-in for a duration of just 3 years. This happens to be the lowest lock-in tenure as opposed to different tax-saving investment options under Section 80C. Even if the returns are little as the market has turned turtle after the lock-in has ended, the Though the lock-in period is just 3 years, mutual fund experts advise staying invested for a longer duration. This is because of the fact that equity investments are quite volatile in nature. However, volatility in equity securities tend to lower down when invested for a longer duration, say 10 years or more. Experts believe that staying invested for a longer duration in ELSS schemes not only aids to save tax but also surges the chances of receiving vigorous returns. What’s more, historical returns suggest that the average three-year returns on ELSS investments is barely around 1.03% returns p.a. However, this figure is likely to get much better, given that the investors continue to invest without exiting their ELSS scheme. The average 10-year returns on ELSS category is whopping 10 to 12% p.a.
ELSS funds are ideal for those investors who are looking to get exposed to equity funds with an aim to create wealth to fulfil their long-term financial goals.
If you choose to invest in ELSS mutual funds, you must not worry about the present or past condition of the market, but rather focus on the future instead. An investor should refrain from investing in ELSS mutual fund for the mere sake of saving tax. That is the wrong approach to invest in ELSS. Happy investing!
