Paying taxes is sometimes considered as a burden as one has to pay them just because one earns a good sum of income. Most of the citizens of the country do not find taxes viable, and that is why they even try to evade them. But why should we get into illegality when we have the option to save taxes legitimately? Yes, you heard that right as Section 80C of the Income Tax Act, 1961, provides the tax deduction on the total taxable income up to an equal amount to Rs.1.5 lakh in a financial year. Among the various financial instruments, ELSS is one of the categories of equity mutual funds which offers such benefit. Accordingly, one can reduce the taxes up to Rs. 46,350 in a year by investing in the top ELSS funds. So, you don't need to opt for tax evasion, instead, make an investment in the best tax-saving securities to avail deductions on your income.
There are several instruments which provide the 80C deduction to the investors in India which include Fixed Deposits (FDs), Public Provident Fund (PPF), National Pension Scheme (NPS), LIC Policy, and so on. All of these have several benefits, but the best among them are the 'ELSS Mutual Funds'. By providing multiple advantages to the investors, they help one in gaining capital appreciation along with tax savings. Here you will find the features of ELSS funds which set them apart from others.
- Least Lock-In Period – In the case of Equity Linked Savings Scheme (ELSS), the lock-in tenure is the least as compared to the other tax-saving instruments. One needs to stay invested only for three years in the ELSS schemes to avail the benefits and can redeem the funds immediately once the stipulated time expires.
- Tax Advantage – As per section 80C of the Income Tax Act, the investors who park their money in the ELSS can avail the tax deduction up to Rs.1.5 lakh in a financial year on the total taxable income. With this, you would be able to reduce the tax burden to a great extent.
- Capital Appreciation – By investing the funds in the equity stocks and securities, the ELSS mutual fund schemes offer the opportunity of fetching capital growth over a longer tenure. As the minimum investment tenure in this category is three years, the invested money gets enough chance to make higher profits in the market. Moreover, the fund managers also get sufficient time to rebalance the portfolio of the investors as per the requirement.
- Tax-Free Returns – The investments made in the best ELSS funds provide the benefit of tax-free returns as well. The interest or dividend earned on the securities are not taxable in the hands of the investors. Furthermore, the capital gain fetched at the time of selling the funds is completely tax-free. Thus, investors need not pay taxes on the income from such investments.
- Investment with a Small Amount – The minimum investment amount in the case of 'Equity Linked Savings Scheme' is just Rs.500. Henceforth, one can start investing with such a small amount to avail the benefits. The SIP plan in ELSS makes it more convenient for the investors to indulge in secure investments on a regular basis and avail tax deductions at the end of the financial year. With this, one can achieve the long-term financial goals as well as reduce the tax liability at the same time.
- No Limit for Maximum Investment – There is no limit for the investors to make a maximum investment in the ELSS funds as in the case of PPF. You can invest as much as you want to gain the advantage of the equity portfolio and earn riches over the course of time.
Hence, it is undoubtedly safe to say that ELSS mutual funds hold an important position among all the tax-saving instruments under section 80C. The investors desirous of gaining the twin benefits of tax savings and capital growth must park their funds in these plans.