Jan 06, 2017 3 min read

Reasons to Invest in ELSS to Save Tax Now

If you are looking for managing your taxes along with better earnings, then here we have the best solution for the same. Read this blog to know the benefits of ELSS.
The time has arrived when assessees have started looking for various alternatives to save on taxes this financial year 2016-17(Assessment Year 2017-2018). The financial year is ending soon, and everyone needs to make proper arrangements for tax management. The last quarter of the year is termed to be the most crucial point of time for every tax payee, and as the quarter has begun already, one has to start one’s tax planning without wasting time anymore.

Here we have provided the best solution to effectively manage your tax liability, which is in the form the ELSS Funds. So let us explore the reasons why investing in ELSS can save tax this financial year.

Tax Benefit Under Section 80C :- The Income Tax Act, 1961, inculcates various provisions regarding tax applicability, charges and rates. As per section 80C of the Act, every equity investment in ELSS Mutual Funds is eligible for tax exemption up to Rs.1,50,000 from your gross total income. Though the exemption amount can be up to Rs.1,50,000, there is no limit for investing the amount in them. You can start from an amount of Rs.500 only.

Three Years Lock-in Period :- Among the various tax-saving solutions that include Public Provident Fund(PPF), National Savings Certificate (NSC), and tax-saving instruments as provided under Section 80C, ELSS has the lowest lock-in period of just three years as compared to fifteen years in the case of PPF. Once the lock-in is over, you are free to redeem or withdraw your funds as per the requirement. Moreover, the experts are of the view that an investor must make an investment for at least five years in the ELSS funds to avail the maximum benefits of wealth creation along with tax saving.

Exposure to Equity Investments :- ELSS falls under the equity asset class of mutual funds that provides investment in the equity and equity-related instruments. By investing in the best ELSS funds schemes, investors avail the exposure to stocks and shares which further help them gain substantial income. Thus, the investors are recommended to invest their money in the ELSS funds to earn the twin benefits of tax saving and wealth creation over a period of time.

Long-Term Capital Gains are Exempted :- The investments in ELSS are made for at least three years due to the lock-in period. Accordingly, at the time of redemption the investors earn the capital gain. In the case of ELSS, these long-term capital gains are not subject to tax liability as of now. Thus, while redeeming your funds from the ELSS investments, you would not have to pay any tax amount to the taxman, and you would be able to enjoy the full benefits of your earnings.

No Fixed Maturity :- PPF which is considered to be a beneficial tax-saving instrument has a fixed maturity of fifteen years which can be renewed for a further period of five years. Thus the investors can stay invested in it for a fixed duration only. While in the case of ELSS Mutual Funds, there is no fixed maturity. The investors are free to stay invested in them as long as they desire and hence, they can accomplish their long-term financial goals. ELSS also caters to the wealth building needs of the investors.

Therefore, it can be concluded here that ELSS comes with a bundle of benefits. By investing your hard-earned money in its schemes, the investors get empowered to earn the maximum returns while managing tax simultaneously. As tax planning has to be implemented as soon as possible for the financial year 2016-17, it is recommended that you must make investment in the ELSS funds.

If you need any further assistance in planning your taxes and investment portfolio, the entire team of MySIPonline is there to help you. You must avail our services and tax planning solutions to achieve efficiency in your tax management.