We have seen the rally of the stock market in the past few years. It has resulted in big returns from equity-linked saving schemes.
Apart from good returns, the mutual fund has been quite helpful in saving income tax as well.
Since most of the tax-saving schemes have a lock-in period of three years, the schemes offer good financial security as well.
Equity-linked saving schemes qualify for tax exemptions under Section 80C of the Income Tax Act. Under this section, investment up to 1.5 lakh in a year can be claimed as a deduction.
Investors can get detailed information about it from seasoned investment planners like Iplan. The investment executives can study the requirement and suggest the best fund.
ELSS is the best investment with tax-saving benefits
ELSS (Equity Linked Saving Schemes) or tax-planning mutual fund schemes are ideal to save tax up to 1.5Lac under the section 80C of Income Tax.
Those who have a horizon of five to seven years, and a high risk tolerance are the best-fit for this investment.
ELSS and other tax-saving options, a comparison
Well, you have a lengthy list of investment choices to build your wealth theoretically. However, it is important to understand that you should investigate the tax liability also apart from the returns.
You should choose an investment which has the least tax liability.
ELSS comes out to be an ideal investment because the returns are higher, and the earnings are partially taxable.
Let’s compare the investment choices:
Five-year fixed deposit has a locking period and it gives 6 to 7 percent interest with the tax liability
PPF has the locking period of 15 years and the return is between 7 and 8 percent. There is no tax liability here.
NSC or other saving certificates give 7 to 8 percent return and the earning is taxable. Here the locking period is 5 years.
NPS or National Pension Scheme which gives 8 to 10 percent returns till retirement and it is also partially taxable.
ELSS gives on an average 15 to 18 percent returns and the locking period is three years. Here, the earnings are partially taxable.
Thus, it is the best investment choice.
Having said it, investments in mutual funds are always subject to market risks.
Hence, it is important to seek consultation and guidance from investment consultants such as Iplan. It insulates the investment from market ups and downs up to the maximum extent and ensures substantial profits.