Updated: Jul 31
If your annual income exceeds the minimum tax slab, you must pay the government a portion of your income as income tax. When you file your Income Tax Return (ITR), you provide the Income Tax Department of India with a form which allows them to gain access to data about your earnings, expenses, and taxes throughout the course of a financial year. You can also receive a tax refund or reduce your tax liability if you file your ITR. If you are also an investor seeking to reduce your tax liability and save tax, then we have to inform you of ELSS.
An equity-linked savings scheme (ELSS) is the only type of mutual fund scheme that enables you to deduct up to 1.5 lacs in taxes under Section 80C. To begin your investment in an ELSS scheme, the minimum amount should be ₹500. However, there is no maximum limit.
Here are a few facts you must know before investing in an ELSS mutual fund scheme.
1. An ELSS mutual fund has a 3-year lock-in period, which implies that you cannot remove your investment before that time. Comparing this to the lock-in periods of other tax savings tools under Section 80C, this period is the shortest among all. A Public Provident Fund (PPF) has a lock-in period of 15 years whereas the National Savings Certificate (NSC) has a maturity of 5 years. You can also invest in ELSS through a systematic investment plan (SIPs), however, it will as well be locked in for 3 years.
2. Investing in ELSS mutual funds allows you to build a significant corpus over time which can be used later to meet your financial goals and desires. 3. Although ELSS funds practice diversification of investments, they invest largely (at least 80%) in equities. Equity markets have the potential to produce better returns than other tax saving investments as these markets are volatile and investments are potentially exposed to big losses and gains. After all, risk and returns are directly proportional to each other. Although equity markets traditionally have produced larger returns than debt-securities markets over the long run, it is crucial to keep in mind that previous performance of investment in ELSS mutual funds is no guarantee of future outcomes.
4. The gains from ELSS mutual funds are exempt from income tax up to Rs. 1 lakh under Section 80C. However, if the gains are held for more than one year and exceed ₹1 lakh in a financial year, they will be subject to long-term capital gains tax (LTCG) at a rate of 10%.
Ambrela.Money aims to help the taxpayers of BHARAT save tax using ELSS by providing them access to a variety of ELSS funds from Asset Management Companies (AMCs). We aim to help investors pick the fund that best conforms to their investment goals, risk tolerance and investment horizon. Ambrela.Money also delivers guidance on how to invest in ELSS funds and assists investors in tracking and monitoring the performance of them.
We can help you become Wealthier & save tax through best ELSS Investments: Let’s get on a Call to understand if we can add any value to your Portfolio. We promise you that this won’t be a sales call – You don’t have to commit to Investing with us, reveal any information that you are not comfortable revealing. We would like to understand the challenges you face while saving and investing your money. If you are in the game, let’s schedule a 30 Minutes meeting here.