Are you a smart investor? Along with having a long-term perspective, a smart investor also saves taxes by selecting the right schemes. The answer to saving taxes – ELSS. Let’s find out how opting for the ELSS scheme can benefit you in multiple ways.
1. Long-term value growth:
The lock-in period for ELSS is 3 years. However, you can continue your investments and let it grow to accumulate more wealth. Thus, you may not redeem it after the end of 3 years. Basically, equity investments are subject to market risks. But you have the chance of having higher returns along with tax exemption as these funds invest your money in equity.
2. A discipline of saving:
As the ELSS scheme lets you invest systematically with as low as Rs.100 (through SIP), your savings could turn into your investments. Thus, with this ease, it will make you get into the discipline of continuous investing. If you start a SIP in Equity Linked Savings Scheme, the returns will be exempted from taxes. The returns are taxable at a concessional rate of 10% only if gains are over and above Rs. 1 lakh.
3. Opportune chance to invest in equity:
There is plenty of other savings scheme to help you build your wealth such as Public Provident Fund, Fixed Deposits, and National Savings Certificate. However, these schemes provide you with meager returns of around 8%-10%. Under favorable situations in the market, you can expect much higher returns. The only thing is to have a good portfolio with quality stocks. When in doubt about which stocks to opt for, you can always the seek help of a financial advisor.
4. Lock-in period:
As stated, there are a variety of savings schemes such as PPF, FD, NSC and many more. However, the savings scheme with the lowest lock-in period duration is ELSS. A mere lock-in period of 3 years is what you have compared to others where the lock-in period goes up to a period of 15 years! If that hasn’t yet convinced you to opt for an ELSS scheme, what else will?
5. Benefits of tax through ELSS:
The major reason why many individuals opt for an ELSS scheme is to save taxes. Under section 80C of the income tax act 1961, investments in ELSS opens your way for a tax deduction. However, under the Income tax act, only Rs.150,000 in a financial year will be allowed for a tax deduction.
Thus, if you wish to even start investing in equities or already an existing investor, opting for an ELSS scheme can not only help you save taxes but also help accumulate wealth.