How to Bargain for Your Tax Bill with ELSS Funds?

Are you one of those people who are miserable at their tax planning? Do you get grilled by the amount of tax that you pay every year? Have you given up on all hopes for finding a solution to your tax problems? Then you have found a cure to your misery as you have landed on the right page. This article is all about dictating the best solution for your tax problems by introducing you to the world of ELSS Funds. They are a remarkably effective channels through which you pass on your money into estates which are specifically designed to cut short your tax liability, thereby improving your annual income status. While there are many options apart from ELSS schemes that can fetch you tax benefits, but the thing to be noted here is that nothing better is available in the market than ELSS funds, the reasons for which we are going to discuss in this article apart from throwing light on the concept and importance of these funds. What are ELSS Funds? ELSS is a branch of mutual funds where the investment is directed towards tax saving. Such investment involves the application of funds towards areas that are capable of abating the tax liabilities. The most prevalent of all is Section 80C of the Income Tax Act, 1961, as it spells out the specific areas that have been authorised by the government to fetch the tax benefits. The Importance The list enumerated by Section 80C contains several options such as an expenditure made towards life insurance premium, payment by an individual towards Employees’ Provident Fund scheme, contribution towards Public Provident Fund Account, but an investment in ELSS schemes grabs the fattest benefits, the reasons for which are mentioned below: -

• The Least Lock-in Period rnELSS plans contain an inbuilt lock-in of 3 years, i.e. you are not allowed to redeem any portion of your investment prematurely before the expiry of the said period of 3 years, from the date on which you made an investment in them. While it might appear an unattractive feature to some investors, but do note that such lock-ins help to stay invested for a longer period, thus helping your funds to pass through different growth cycles and increase the chances of wealth appreciation.
• Save Taxes up to Rs. 46,350 As an investment in ELSS schemes is eligible for the benefit available in Section 80C of the Income Tax Act, 1961, the amount that you invest in these schemes will let you avail the deduction of a hefty amount of Rs 1,50,000 from your annual taxable income, thus cutting down your annual tax bill by as much as Rs. 46,350/-
• The Highest Paying Instrument While there’s a long list of options that are capable of fetching tax benefits, ELSS surpasses them all by having the highest paying grade amongst all other options. If you check the past five years record of ELSS funds, you’d be surprised to find that some of the best ELSS Funds have spewed returns as much as 15-18%.
• Partially Taxable Returns The returns on your ELSS investment are partially taxable (w.e.f. 31st March, 2018 the returns on ELSS plans are taxed at a flat rate of 10%, if they are higher than Rs. 1 lac), which makes it an even better option than investing in other tax-saving instruments such as bank deposits and National Savings Certificates, where no relaxation has been given for taxing the returns and the full amount falls within the tax bracket.
• Easy Option of SIP One of the most important aspects of ELSS Funds is that they provide an easy investment option in the form of SIP, where you can start with as little as Rs. 1000 (Rs. 500 in some cases) a month. This reduces the burden of pouring in a heavy amount in the funds at once, and thus provides the freedom of increasing your monthly amount as per your convenience. Such option is not available in any of the other tax-saving options listed in Section 80C.

Investing in ELSS schemes is a vital tool for cutting down your tax liabilities. Also, they are a great resort to earn lucrative returns that are partially taxed, thus helping you to raise the health of your bank balance, every year. This article describes the importance of ELSS Mutual Funds and pinpoints the important role that they play in tax saving.