Jul 21, 2017 3 min read

Why Early Investments in ELSS Through SIP Reap Benefits?

Early investing in ELSS through SIP is the most efficient way of making money and saving taxes simultaneously. Know how.
Regular investments in the ELSS give the benefit of cost averaging, better returns and help to avoid the year-end complications. Instead of waiting for the year end, its is better to begin planning right away. Being an investment option that provides the tax benefit greater than those offered by other tax-saving instruments, the ELSS is considered to be the best plan one must buy for one’s portfolio.

We often hurry in the last month of the year to make an investment just for the purpose of saving taxes; it is highly recommended that if you make the purchase of an ELSS fund at the right time through the Systematic Investment Plan, the benefits and advantages would be uncountable.

We all know that decisions taken in a hurry have higher chances of being wrong since they do not allow ample time to analyse and choose a plan appropriate for our needs. Investing in ELSS is no exception to it. Moreover, it is very difficult to time the market unless you are exceptional. It has been held many a time that even the experts miss the chance to track the largest bull in the market. So we need someone who can just take care of our money and provide us several other benefits along with tax savings. And, the SIP plans are not a bad option in this context.

How Can We Avail the ELSS Benefits in the SIP Way?

You must be well-versed with the basic concept of SIP wherein one invests a particular sum of money at a regular interval, which is pooled in by the fund house and then invested in the best available investment avenue. This is the best approach to become a disciplined investor as the amount is auto-debited from the bank account.

By investing in the ELSS tax-saving funds in India through SIP, you can invest a small amount from the very beginning of the year and can save a great sum of money in the financial year to avail the deduction under Section 80C. With this, you not only fetch the benefit of cost averaging, but the power of compounding lets you earn tremendous wealth as well.

Why Start SIP in ELSS As Early As Possible?

Starting a SIP in the year-end is not a good idea. Here’s why - Suppose you want to start a SIP of Rs.2000 in ELSS. If you start it in the month of say January (as the last three months of the financial year are often taken for planning taxes in India), you would be able to make an investment worth Rs.6000 at the end of the year, i.e., March 31. Accordingly, you would be offered the benefit of Rs.6000 only under Section 80C.

However, if you begin investing in the month of April, i.e., at the beginning of the year, you will have a total of Rs.24,000 as an investment in ELSS, and you would be able to get the deduction of the same amount. This will provide you the benefit of more tax savings as the deduction would be of a higher amount. Apart from this, you will also fetch one-year SIP returns on your ELSS that would be an additional benefit and that too tax free.

Hence, it is recommended to buy ELSS SIPs as early as possible to reap greater benefits. There are several ELSS mutual funds in India which are performing tremendously and yielding greater returns to the investor apart from tax savings. There are various last-minute hassles which one faces and even end up making no investments and no tax savings. They include -

  • Transaction failure.
  • Bank-related issues such as a mismatch of signature on the cheque, incorrect spelling, etc., leading to rejection of the request.
  • Any other personal reasons due to which you couldn’t invest.

So, you must begin searching for the best strategies and buy the ELSS fund that suits you the most via SIP. You can buy them at MySIPonline by using the best tools and online solutions that will make your investment journey smoother.