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The tax-saving benefits of Equity Linked Savings Scheme (ELSS) mutual funds serve as their unit selling point in the financial market. Every investor who has a knack for mutual funds analyses his chances of investing in ELSS. However, the concept of how this investment option helps save taxes is a little complex for beginners. ELSS stands as the only class of mutual funds that offers tax deductions under Section 80C of the Income Tax Act. The chances of wealth accumulation using these funds are high but so are the risks involved in the same!
ELSS mutual funds are widely known for carrying the highest level of transparency in the market. Let us delve into this discussion and get an understanding of how ELSS funds help in saving taxes.
Explore How ELSS Mutual Funds Help In Saving Taxes
ELSS funds serve direct tax returns under certain conditions set exclusively for this type of mutual fund investment. Here are a few ways that facilitate tax benefits to investors who dare to take the high risks involved in ELSS investments.
Deductions Under Section 80C
Every investor can reap tax deductions of up to INR 1,50,000 on his ELSS mutual funds investment. If estimated roughly, one can save as much as INR 46,800 a year by making a secure investment in the section. This open-ended fund can help one save a large portion of his investment returns.
Potential Of High Returns
All fund managers ensure investing a vast part of ELSS funds predominantly in equity investments. As every investor knows, the returns from equities are higher than all other forms of investments. Therefore, the potential of high returns that will not get taxed help save a lot of money.
Options of Growth & Dividend
The dividend returns and growth prospects of ELSS funds are much higher than other mutual funds. If the odds are in favour of an investor, he can make the most of his preferred online investment platforms and earn a fortune!
Shorter Lock-In Period
Most mutual funds have a short lock-in period of three years. Although beginners do not prefer holding their money for so long in the market, there are possibilities that investors often ignore. This period allows the fund manager to diversify investments and recover losses in a short time. However, the credibility of fund managers becomes a problem!
Protection Against Market Volatility
When it comes to equity-linked investments, ELSS mutual funds are undoubtedly the best option! Investing in these funds builds discipline and prepares investors for bearing the risks. Since the lock-in period bounds investors to hold their money through the thick and thin conditions of the market, it turns out to be a win-win situation.
Combination of PPF and ELSS
Investors can couple their ELSS investments with their PPF for significantly higher benefits. This combination helps uncover the stability of PPF and the high earning potential of ELSS funds. The mix of debt and equity also diversifies one’s portfolio to a great extent!
The Final Say
ELSS mutual funds are highly beneficial and profitable if one invests wisely after analyzing all the possible risks involved. The availability of online distributors and investment platforms has made it easier for investors to make the most of their time and money. One should choose a platform that offers valuable insights into the market. One can diversify his investment portfolio while saving taxes.
The high liquidity, low charges and tax-free gains are worth taking risks involved in this type of mutual funds investment. With the help of online brokers, one can earn high returns without having to pay a share to the government!
