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    Invest in these three ELSS funds to save taxes this year

    Synopsis

    The best tax-saving option available under Section 80C is an Equity Linked Savings Scheme (ELSS) or tax-saving mutual fund schemes.

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    Tax saving season is almost here. The last three months of the financial year, starting from January to March, are considered tax-saving months by many taxpayers. However, the process starts from December when the human resource departments of companies ask employees to furnish proof of their tax-saving investments. Have you given the investment declaration under Section 80C of the Income Tax Act and still undecided about where to invest to save taxes of up to Rs 1.5 lakh?

    Well, there are many options available to you under Section 80C: starting from the eternal favourites like Public Provident Fund (PPF) and National Savings Certificate (NSC) to life insurance policies. However, if you ask us, we would tell you that the best tax-saving option available under Section 80C is an Equity Linked Savings Scheme (ELSS) or tax-saving mutual fund schemes.

    Why is it so? Well, to begin with it comes with the shortest mandatory lock-in period. Every investment option available under Section 80C comes with a lock-in period. For example, NSC comes with a mandatory lock-in period of five years, whereas PPF is a 15-year product. In comparison, an ELSS comes with a lock-in period of merely three years.

    Note, though it comes with the mandatory lock-in period of three years, you don’t have to compulsorily exit these schemes after the lock-in period. If the scheme is performing well, you may continue with it if you wish.

    Next, an ELSS invests mostly in stocks. And stocks are the best investment option to create wealth over a long period. This is because stocks can offer superior returns than other assets in the long term. That is why an ELSS could be the first equity mutual fund scheme for most investors.

    An ELSS is an ideal first fund because of its lock-in period, as it helps many investors to weather the volatility, typically associated with the stock market. During the three-year lock-in period an investor would get used to the vagaries of the stock market and s/he may be inspired to start other investments in equity schemes.

    The ELSS category has offered 13.33 per cent in the last three years, 19.11 per cent in the last five years, and 9.46 per cent in the last 10 years. Now you know why we told you ELSSs are the best bet to achieve your long-term financial goals. It is always better to assign a goal to your ELSS investments. It will help you to stay invested for a long time.

    If you are confused about which ELSS to pick up, here is some help. Here are our recommended equity mutual fund schemes that would help you to save taxes and build wealth over a long period:
    L&T Tax Advantage Fund
    Aditya Birla Sun Life Tax Relief '96
    DSP BlackRock Tax Saver Fund

    For more, read: Best tax saving mutual funds or ELSS to invest in 2017

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