Equity-Linked Savings Schemes or ELSS have grown to be a popular mode of investing in the past few years. Under Section 80C of the Income Tax Act,1961, ELSS funds offer tax expemtion of up to Rs1.5 lakh from your annual taxable income. An investor can save up to Rs46,800 by investing in ELSS mutual funds, provided he/she belongs to the highest tax bracket, i.e. 30%. Investing in these tax-saver mutual funds is quite simple. Just follow these steps:
- Determine your tax slab and your taxable income
Analyse your tax slab so that you can utilise your ELSS investments to the fullest. Even investors under the highest tax slab, i.e. 30% can save up to Rs46,800 by investing in ELSS mutual funds.
- Pick the best tax saving mutual funds
Though ELSS funds are one of the tax-saving investments, one should not invest in ELSS solely for that purpose. Choose a fund that fulfils both the parameters – yield high returns and efficient in saving tax.
- Choose your intermediary
Though investors have the option to invest in ELSS funds directly via mutual fund companies, it is advised to opt for an intermediary. You can invest through a mutual fund distributor or an online distributor.
- Systematic Investment Plan (SIP) investment or Lumpsum investment
This is one of the most essential steps in planning your ELSS investments. If you have a surplus amount which is lying idle, you might want to consider the lumpsum mode of investing. However, if you cannot arrange the entire corpus at once, but in intervals, you might want to go with the SIP option.
- Redemption of ELSS funds
ELSS funds are offered with a lock-in period of 3 years. Hence, investors can redeem their investments only post the lock-in tenure is over. The redemption procedure is quite easy. You simply need to fill an ELSS redemption, and the money will be added in your account within 3 days.
Though ELSS mutual funds have a lock-in period of just 3 years, it is advised to stay invested for a longer duration. So let your ELSS investments complete at least one entire financial cycle. This will help you to recognise the highs and lows of the market. Experts also recommend investors to link your ELSS investments with your long-term goals so that you don’t worry about your finances over and again and let your investments grow. Happy investing!