The Benefits of Tax Saving with ELSS
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1. Dual Benefits: Tax Savings and Investment Growth
Equity Linked Savings Schemes (ELSS) combines tax-saving benefits with the potential for high returns. Under Section 80C of the Income Tax Act, you can claim up to ₹1.5 lakh annually, reducing your taxable income. Unlike traditional savings tools like PPF, ELSS offers market-linked growth, enabling you to multiply your wealth over time while saving taxes.
2. Lower Lock-In Period
The Benefits of Tax Saving with ELSS has the shortest lock-in period of just three years compared to other tax-saving options:
- PPF: 15 years
- NSC: 6 years
- Tax-Saving Fixed Deposits: 5 years
This lower lock-in period enhances the liquidity of your investment, giving you access to your funds sooner.
Why ELSS Offers Superior Returns
3. Higher Returns That Are Tax-Free
Among Section 80C options, ELSS stands out because its returns are both superior and tax-free.
- Returns from ELSS and PPF are exempt from tax.
- Returns from NSC and tax-saving FDs, however, are taxable.
With ELSS, the equity exposure ensures higher returns over the long term, making it a clear winner for wealth creation and tax efficiency.
ELSS: A Gateway to Equity Investing
4. A Simple Way to Start Investing in Equities
If you’ve never invested in equity markets, ELSS is a great starting point. Its lock-in period ensures you avoid rash selling decisions during market fluctuations. Over time, you’ll see stable and rewarding growth.
5. SIPs for Consistent Investments
Investing in ELSS through Systematic Investment Plans (SIPs) allows you to invest small amounts regularly. SIPs not only make it easier to save but also help average out market risks over time, ensuring smoother returns.
Why Choose ELSS Over Other Options?
- Short Lock-In Period: Enjoy higher liquidity with a 3-year lock-in.
- Market-Linked Growth: Benefit from equity market exposure for superior returns.
- Tax-Free Returns: Save taxes under Section 80C while earning tax-exempt returns.
For those new to mutual funds, ELSS offers the perfect balance of risk and reward, making it a powerful tool for both beginners and seasoned investors.
Final Thoughts
Investing in Equity Linked Savings Schemes (ELSS) is more than just a tax-saving exercise; it’s a smart strategy for long-term wealth creation. With benefits like a lower lock-in period, tax-free superior returns, and an introduction to equity investing, ELSS stands out as one of the best options under Section 80C.
Start your journey today by investing in ELSS through SIPs. Save taxes, secure higher returns, and pave the way to financial independence.
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by Prashant M. Mehta