Tax saving mutual funds or Equity linked Saving Schemes (ELSS) help you to save income tax under section 80C of the Income Tax Acts. You can invest a maximum of Rs 1.5 Lakh in ELSSs and claim tax deductions on your investments every financial year. Are you Interested? Before procedding further, you should first familiarise yourself with ELSSs.
Tax Saving mutual funds or ELSSs invest in stocks. Therefore, they have very high risk. You should be aware of this aspect, expecially if you are a first-time investor in equity mutual funds. Compared to your usual investments like Public Provident Fund, ELSSs do not offer gauranteed returns. You may even suffer losses in a bad market.
why should you invest in ELSSs?
One, These schemes have the potential to offer higher returns. As you know, these schemes invest in stocks. And stocks typically offer higher returns over a long period of time. For example, the ELSS category offered an average return of around 15% over 10 years.
Two, ELSSs have the shortest lock-in period among tax saving investments. Most other investment options under the 80C basket are government-backed investments, They typically come with longer lock-in periods. For exmaple, PPF is a 15-year product that allows partial withdrawals after six years. The NSC is a five-year product that allows partial withdrawals after six years. The NSC is a five-year product. So, if you want access to your money in three years, you should invest in ELSSs. But don’t count on it to offer you great returns in three years. you should always keep in mind that equity investing is for the long term. You should invest in equity mutual funds only if you have an investment horizon of five to seven years. they start investing more money in equity schemes
If you are interested in investing in these schemes, here are our recommeded ELSSs you can consider investing in the new year. Note, there are no changes in the list this month. All the schemes in the list have retained their spot. However Axis Long Term Equity Fund, one of the recommedded schemes, was in the thied quartile last month. Watch out for our monthly updates to keep track the performance of your schemes.
