Money Goals
Wanted to save tax—ended up starting with ELSS
ELSS tax savings helped me achieve tax and investment goals.
Key insights
ELSS stands for Equity Linked Savings Scheme.
ELSS tax savings contribute to your wealth-creation goal by investing in equity.
There are two ways to achieve ELSS tax savings, i.e., SIP and lumpsum investing.
ELSS investing is subject to a lock-in period.
Normally, you cannot redeem your units until three years from the investment date.
The moment I received my first offer letter, I felt like an adult, literally. With this feeling, there also came a sense of responsibility to manage my finances. This popped some important questions into my mind - ‘How can I save taxes strategically? Where should I invest?’
Going by the ‘early planning’ approach that many of my financially-wise friends recommend, I started working toward it even before the first paycheck landed in my bank account. I knew that it was important to optimise my tax strategy by leveraging all applicable deductions.
This made it relatively straightforward for me to find a solution that perfectly matched my tax savings and investment needs. ELSS was the obvious answer. This one tool not only helps save tax but also contributes to wealth building through investments.
Sounds too good to be true, doesn’t it?
If you are facing a similar dilemma that I faced a while ago, read on, as I share with you all that I know about ELSS tax savings and ELSS investment benefits.
What exactly is ELSS?
Before I tell you about the ELSS tax savings and ELSS investment benefits, let’s understand the concept of ELSS.
ELSS stands for Equity Linked Savings Scheme. It is an Equity Mutual Fund that qualifies for deduction under section 80C.
Simply put, you can deduct the principal amount that you invest in this Mutual Fund from your taxable income. Section 80C allows a total deduction of ₹1.5 lakh, including all eligible investments.
What more? Since ELSS is an Equity Mutual Fund investing largely in equity, it contributes to your wealth-building journey over time.
This is how ELSS helps optimise not just your tax but also your investment strategy.
However, you should know that ELSS investments are subject to a lock-in period. Your investments typically remain locked for three years. You cannot redeem your investments until three years from the date of investment.
How can you avail of ELSS tax savings and ELSS investment benefits?
The ‘ELSS investment for beginners’ process allows you to invest in this scheme in two ways, i.e. SIP or lumpsum. Let’s understand the two in detail.
SIP (Systematic Investment Plan)
The SIP ‘ELSS investment for beginners’ process facilitates investment of a fixed amount at a predefined interval for a defined period. For instance, you may invest ₹2,000 every month for the next 10 years.
SIPs help inculcate financial discipline and benefit from rupee cost averaging. Furthermore, you can automate your investments and eliminate the worry of missing out on any instalment.
Lumpsum
The lumpsum ‘ELSS investment for beginners’ process lets you invest a lumpsum amount in one go, as against fragmented investments.
The next time you get a bonus or make a windfall gain, consider investing in ELSS, rather than spending it entirely on random purchases or keeping it in a low-interest Savings Account.
A smart move like this gives you both ELSS tax savings and ELSS investment benefits.
ELSS tax savings and ELSS investment benefits can optimise your financial strategy
ELSS is a single tool with dual advantages, i.e. ELSS tax savings and ELSS investment benefits. You not only save on your taxes but also contribute to your investment goals.
Just like how a smart watch tells you the time and also helps track your fitness, ELSS plays a similar dual role in the financial world. It reduces your tax burden and increases your wealth-creation potential.
Before investing, make sure it aligns with your risk appetite, liquidity preferences, and investment horizon. A well-informed decision helps you make the most of these dual benefits, aligning with your overall financial strategy.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
By Axis Bank Learning Hub Team
