All businessmen as well as working professionals want to save as much tax as possible. That’s because the tax is an expenditure just like any other expense, but if we learn to smartly invest our hard-earned money we can find a way to save tax. There are several tax saving schemes under Section 80C of the Income Tax Act, which enable individuals to claim taxation benefits. But one mutual fund scheme that is highly appreciated by retail investors across the spectrum is Equity Linked Saving Scheme, widely referred to as ELSS. In this article, let us understand how ELSS helps an individual save taxes.
But before understanding how ELSS help save tax, you should understand that level of risk ELSS brings with itself.
Equity Linked Saving Scheme or ELSS is a mutual fund investment scheme that has a minimum lock-in period of three years and offers you a chance of capital appreciation in equity along with tax-saving benefits. The reason behind that being ELSS invests majorly in equities. Since investment in equities gets affected by market volatility, investment in ELSS schemes attracts market volatility risks.
Now that we have understood the risks involved in ELSS investment, let us understand the advantages of ELSS investment:
1. Tax Exemption
The primary goal of an ELSS Scheme is to help taxpayers save some money. As stated earlier, with ELSS an individual can claim tax benefits of Rs. 46, 800* with an annual investment of up to Rs. 1.5 lakh. Even though the Section 80C of Income Tax Act only allows tax exemption worth Rs. 1.5 lakhs, there is no limitations of investing in an ELSS scheme.
2. Low Lock-in
ELSS has a lock-in period of three years. This is the shortest lock-in periods among all the tax-saving instruments.
Now that you are aware of advantages of ELSS, let us introduce you Axis Long Term Equity Fund (this is an open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit) So if you want to save tax while aiming to build wealth, invest in Axis Long Term Equity Fund now.
*As per the present tax laws, eligible investors (individual/HUF) are entitled to deduction from their gross income of the amount invested in Equity Linked Saving Scheme (ELSS) up to Rs.1.5 lakhs (along with other prescribed investments) under section 80C of the Income Tax Act, 1961. Tax savings of Rs. 46,800 mentioned above is calculated for the highest income tax slab. Investors are advised to consult his/her own Tax Consultant with respect to the specific amount of tax and other implications arising out of his/her participation in ELSS.
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