Even though the Union Budget for 2018-19 repealed the LTCG tax on capital gains above Rs. 1 lakh annually from ELSS investment, it is still a sensible tax saving scheme among others coming under Section 80C of the Indian Income Tax Act, 1961. An Equity Linked Savings Scheme is an open ended tax saving scheme that comes with a lock in of three years. -In term and a tax benefit. ELSS is probably the only equity mutual fund scheme whose investment is eligible for submission of tax declaration and investment proof. ELSS is far more flexible than other conservative schemes and invests mainly in equity and equity related instruments.

Here’s an example to help you understand how ELSS works –

Natasha Sharma is the Marketing Head in a private firm, earning Rs. She earns 12 lakh per annum. This puts him in the highest tax bracket. Natasha comes to know about ELSS from a friend and decides to invest Rs. 1.5 lakh in tax saver fund. Now as per 80C of the Indian Income Tax Act, 1961 a person can invest up to Rs. in 1,50,000
ELSS And claim tax deduction for the same. By investing in ELSS, Natasha’s gross taxable income now comes down to Rs. 10.5(12-1.5) lac per annum. Also, the lock-in of three years will ensure that the invested amount continues to earn interest and can help build wealth in the long run.

What makes ELSS a sensible investment option for taxpayers?

If you are wondering where to invest this financial year to avoid tax hassles, then you can consider investing in ELSS. Here are some of the reasons why ELSS is a far better investment option than other tax saving schemes – ELSS tenure is short – Equity linked savings plan comes with a minimum lock-in period of three years. The lock-in period of three years is still the shortest among those tax saving instruments covered under Section 80C of the Indian Income Tax Act, 1961. Investors are free to either redeem their ELSS units after the lock-in period is over or they can choose to stay invested if the scheme is performing and shows potential to earn better interest over the long term.

ELSS has SIP option – To ensure that you continue investing in ELSS, you can consider starting monthly
sip In ELSS scheme. A Systematic Investment Plan is an easy and convenient way to invest in ELSS scheme. If you are a KYC compliant individual, you can invest in ELSS from the comfort of your home using a laptop or smartphone and a good internet connection. SIP is a way of investing small fixed amount at regular intervals. Not only will you continue to invest in a disciplined and systematic manner, but you may also be able to benefit from investment techniques such as rupee cost averaging and the power of compounding.

ELSS is ideal for long term goals – Since ELSS scheme is an equity oriented scheme and requires a long term investment horizon. Thus, investors can target their long-term life goals such as building a retirement corpus, buying their dream home, planning a post-retirement world tour or securing their child’s future. If you continue investing in ELSS for a long period of time, you may be able to achieve your long term financial goals.

“This is an investor education and awareness initiative by Axis Mutual Fund. Investors need to complete a one-time KYC process. For more details visit www.axismf.com or contact us at [email protected]. Investors should only Should deal with registered mutual funds, details of which are available at www.sebi.gov.in – INTERMEDIARIES/MARKET INFRASTRUCTURE INSTITUTIONS section. For any grievance redressal, investors may call us at 1800 221 322 or write to us at customerservice@ axismf.com or register a complaint on SEBI Scores Portal https://scores.gov.in.