Streamline Your Tax-Saving Investments with an SIP in ELSS
Posted on 6th Jun 2017 12:36:22 in Tax Savings
Everyone has some dreams and a financial goal in life. We are ready to walk an extra mile to fulfill these desires for a comfortable retirement, children education, or a bigger home. You may work harder and save more to live your dream. However, you saved money should also scale with your growth. Instead of parking it in a bank, invest your money with an adequate planning, so that your gains will forever stay with you. Without taking undue risks, you need an investment option that provides good growth in the corpus. Investment in equities has emerged as a significant option from the perspective of 8-10 years. For long period, the stock market in India has offered exceptional returns to its investors. S&P BSE- Sensex, the benchmark index of the stock market, has given 15% annual returns on investments in the last 15 years. On the other hand, equities are equally beneficial on the taxation front. Capital gains are totally exempted from taxes if you have invested in equity for more than one year. But, due to easy vulnerability and higher growth potential, investors sometimes enter the market with a limited knowledge. For such people who want to take advantage of stock market growth but with a professional approach, systematic investment plan (SIP) in ELSS is the best option to go for. ELSS is an acronym for ‘Equity Linked Savings Scheme’. This scheme is well conceptualized for tax savings. It provides a shield of capital gain tax as well as an annual tax deduction under 80C up to 1.5 lakh in a year. Investment in ELSS is locked for 3 years while returns after that period are totally tax-free. SIP is the right way to invest in the stock market. Under this scheme, a pre-determined amount will be invested in ELSS every month. How Is This Tax Saving Investment Less Taxing? Counters Inflation: Undoubtedly, investors are more concerned about the visible threats. However, a formidable and unseen threat like inflation is a bigger risk for your investment. If you calculate your returns on a fixed deposit after deducting taxes and compare it with the inflation rate of 8.5% from last 10 years, you will find that the value of your investment has actually decreased. Therefore, you should invest in an instrument that can counter inflation. Equity is an ideal instrument that can negate the effect of inflation on your investment. ELSS schemes from mutual fund houses have given annual returns of 10-15 % on investment. This scheme not only provides monetary growth but also combats inflation in a longer term. Automatic Management of Investment: Conventionally, an investment in profitable schemes was not considered rational. However, ELSS is an efficiently managed investment that works on an auto mode. A designated Funds Manager takes care of your investment. You just need to start SIP in a scheme. Here, you will be allotted with units based on the NAV of a particular date every month. NAV is high when the market is soaring while NAV is low when the market is bearish. Hence, you accumulate more units when NAV is down and fewer units when NAV is up. On an average, your cost per unit remains low. With a rise in NAV, your gains also elevate during the course of time. Auto-Pilot Tax Saving: Many people wait till the last month to invest in tax-saving schemes in a financial year. Sometimes, these hasty decisions are not sound and you end up messing with your hard earned money. SIP in ELSS schemes provides a convenient auto-pilot investment mode where you transfer pre-defined money every month for your financial goal. SIP provides an edge over other investments. It is much easier to save a little amount every month instead of investing a lump sum at the end of any financial year. If you calculate the taxes saved and tax-free returns, you will find ELSS more beneficial. You need to select one of the well-performing ELSS schemes offered by a reputed mutual fund house to explore tax saving investments that are less taxing and easier to manage. Take help from the experts and watch your money grow step-by-step.