How to save tax with the help of ELSS

Equity Linked Saving Scheme is one of the best schemes to save tax under theS80c of Income Tax Act. ELSS schemes are mutual funds that are supervised and allocated by fund managers who have the experience required to put your investment in places where you will get maximum returns. They are professionals who have the duty to invest your capital better.

Here are some tax saving tips with the help of ELSS:

1. High ROI: Investing in ELSS is ideal for those who want to invest long term and expect high returns on investment. Investment upto Rs. 1,50,000 per year in ELSS are exempted under the S80c of Income Tax Act, 1961. ELSS gives its investors a dual benefit of tax saving on one hand and high returns on the other. However, one catch here is that ELSS works best for those who want to invest medium to long term. According to its background check, ELSS has been able to generate a profit of 12% in ten years and over. Another good scheme, such as PPF, has been able to generate approximately 8% over the same time. So, ELSS is probably the best deal in the markets as of now.

2. Flexible Plan: If compared to ULIP, ELSS is more flexible in terms of investment, since it does not operate on a multi-year deal. This means that if you are unhappy with your portfolio, you can switch to another fund according to your preference. ULIPs on the other hand restrict investors, in this case, only to switch to another fund that is offered by the same ULIP. The binding commitment is not a part of the ELSS as it is of the ULIP scheme.

3. Discipline: For first-time investors, ELSS is a good choice because of many reasons. It doesn’t just help in saving tax and riding higher returns, but also sets the right discipline for investors. The low lock-in period of three years will set the pace right for amateur investors. They can later go on to invest in equity mutual funds. The ELSS has proven to have less market lows as compared to other schemes. It also works as a shield against volatility in the stock market.

4. No compulsory redemption: After the three-year lock-in period, the investor will have an option to either redeem his investment or continue with the scheme till whenever he wishes. This is a great way to encourage long term investment, which will result in higher returns.

ELSS is a great option for investment for newcomers in the field of investment. It has ample benefits that will help first-time investors to build a good portfolio under the guidance of fund managers, so they can move on to invest themselves in good stocks and assets. It is the only scheme applicable for tax deduction under the Income Tax Act, which makes it even more attractive.