If being a young earner you don’t know how to save income tax by the end of the financial year, then opt for ELSS funds and invest up to Rs.1.5 lakh. Investors falling under the 10% tax slab can save tax up to Rs.15450, investors falling under the 20% tax slab can save up to Rs.30900 and investors falling under 30% tax slab can save up to Rs.46350 (including education cess).
However, before choosing an ELSS scheme, make sure you are ready to take market risk because more or less you are doing investment in one of the diversified equity funds only.
How can ELSS help in financial planning?
For your long-term financial goals, you can opt for ELSS funds which will give you the dual benefit. ELSS being the most popular mutual fund not only provides capital appreciation but also helps in saving tax for investors. While planning for taxes, ELSS suits the best for investors. On the other hand, the appreciated capital will help you achieve your goal. But make sure that the goal’s time horizon should not be less than 3 years.
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How can we save tax without doing fresh investment in ELSS?
Although it sounds weird, but yes, if you invest consecutively for three years in ELSS growth fund, then after that in the fourth year redeem the first year’s amount because by that time the 3-year lock-in period of the first cycle would have been over. So, re-invest the appreciated capital or else just book the profit and reinvest the capital amount again in some other ELSS fund or the same fund. This way you can save tax through ELSS schemes under section 80C year on year from the fourth year without doing any fresh investment. Also, no tax is imposed on long-term capital gains made through this fund. This can work only under the condition when the markets are performing better. However, reinvestment should be done under the proper guidance of a financial adviser.
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Which are the best performing fund available in ELSS category?
Funds are always designed in such a way that they do perform better and beat the inflation. But certain economic and political factors tend to slow down the growth, and uncertainly has an impact on the financial market. Nonetheless, ELSS gives good returns after a certain interval of time, mainly after the lock-in period is served.
Some of the funds which are giving good returns currently are listed here: