The taxpayers have to spend a whole lot of their money while paying the annual income tax. In this scenario, a tax-saving exercise is a must. But planning such a program to be financially benefitted is never a matter of ease. Hence, endeavoring to link the tax-saving investment with the ELSS mutual fund scheme. Section 80C enables taxpayers to enjoy a fair quotient of deduction in the tax by putting their investment in some of the specified schemes like those of NSC (National Savings Certificates). Premium paid taxpayers, PPF (Public Provident Fund), etc.
Putting the ELSS in comparison to that of the Section 80C of the government
Taxpayers can avail of a huge reduction in the amount of payable tax by investing their hard-earned sums in schemes like PPF and ELSS. But an additional offering of ELSS is that it offers a fair deal of liquidity.
Comparing with PPF (Public Provident Fund):
One must put all the schemes and financial tools into comparison to figure out the best financial tool that can help in acquiring the utmost benefit.
The liquidity of PPF is quite less as compared to that of the ELSS. PPF is a scheme that has a minimum lock-in period of 15 years. It can even be renewed in a block of five years. But this proved that the scheme offers very little liquidity as compared to that of the ELSS.
Get to know the tax-benefits of ELSS:
There are several tax-saving benefits that the schemes widely known for. Under section 80C of the Income-tax Act of the year 1961, The ELSS schemes are the most tax-friendly options which are there available for people. The tax benefits offered by the scheme to the people is incredible.
Rs 1 lakh of tax is exempted every year for the investors if they are putting their money in ELS. If the amount exceeds the number 1 lakh, then10% of tax is allowed on the rest amount.
Hence, ELSS has the virtue of offering magical dual benefits for people, which is wealth creation as well as tax-savings. The ELSS has no taxation during the investment period. The scheme guarantees to offer the investors with the utmost of the benefits with the minimal capital. The capital gains which are excess to an amount of Rs. 1 lakh, then they are subjected to a taxation of 10%. Hence, the scheme is not just tax-free but one of the most lucrative financial tools for the earners to save a huge part of the tax that they will have to pay to the government.
Know the liquidity of ELSS:
ELSS mutual funds offer quite a high rate of liquidity as compared to the other funds. Other schemes like those of NPS, saving bank FDs, etc. have a lock-in period of five long years. The liquidity on the investment is also limited. But on the other hand, the ELSS funds offer a huge amount of liquidity which ultimately benefits the investors. Thus, the ELSS can be the most flexible investment as it has a period of 3 years as the lock-in duration. Hence, it leaves the investors with the option of giving up on the stock or continuing the investment as it is.
How can ELSS be the perfect thing for accomplishing financial goals?
The people who are looking forward to saving taxes must bring to the note that putting money in the schemes must not be only intended to avail a deduction on the taxes but at the same time, it must also be intended to attain financial goals over a long period.
The scheme has a whole lot of wealth creation potential and done can avail a huge amount of funding for achieving the amount for building houses or achieving other financial goals. Being the equity plans, ELSS can be volatile if they are invested for a short period. The larger investment horizon can invest a more lucrative one.
There is a suggestion made that investors should link their financial goals for a longer period. The lock-in period is three years in the case of ELSS but people are even given the choice of continuing with their investment
Hence, this article brings the focus of readers to some of the important topics of tax-saving like those of the ELSS. Thus, the readers can make a fair comparison of different funds and have a broader idea about ELSS can help in accomplishing the financial goals. It can be a great scheme to save taxes. It is a legal scheme that helps in saving people from paying heavy taxes. You can even take advantage of the scheme by reaching out to a financial advisor and invest your sums in ELSS. And you can meet your long term financial goals.