Is ELSS the best Tax saving scheme in India

Under the Section 80C, Equity Linked saving Scheme is a great financial instrument to invest and get great returns in the future. This is also one of the most effective income taxes saving medium in addition to long term wealth generation investment structure to go with. The financial year 2016 is almost at its end and the employees are rushing to gather their respective documents of investment to enjoy proper tax deduction. Before indulging in this medium of tax saving scheme it is better to know the pros and cons.

ELSS pros

The lowest time span for locking the investment to avail tax saving option is 3 years.

Investing in mutual funds can be fruitful as it is capable to draw returns higher than inflation rate.

The earnings over the lock period are absolutely tax free.

Interests are compounded and eventually the earning is considerable in the long run.

Via systematic investment plan, invest at different stages and earn more profit. Stopping and starting can be done as per the wish of the investor.

ELSS cons

There are a lot of funds in this segment which makes it very difficult to decide where to put the money.

There is a huge volume of documentation required for the process at the beginning phase.

Equity related risks are involved as the market is absolutely dynamic hence the investments are subjected to those risks so there is no guarantee of returns.

Withdrawals cannot be done before the lock in period.

In comparison to other schemes

No doubt ELSS has greater risks involved compared to the other mediums available to save taxes but as well all know that with great risks come great benefits too. With tax benefits and high capital appreciation options, it can be a great way to deduce tax to considerable level. ELSS has the shortest time span for locking the investment in comparison to National Savings Scheme (NSC) or public Provident Fund (PPF).

How to invest in ELSS

The investment can be done in a lump sum way or systematically by dividing the amount in particular phases. The investment actually has no upper limit but the lower limit is Rs. 500 every month. Systematic Investment Plan or SIP is the best way to reduce the risks or volatility of the market and ensure the returns

in the future. There is no age bar to start an ELSS. This scheme is best for those who are planning for tax saving instruments and are capable to take risk in long term factor.

Claiming tax benefits from ELSS funds

The ELSS funds when not withdrawn before the locking period it will provide huge tax benefits. Under the Section 80C, the professional have to present a copy of the account statement as an investment proof. The planners also suggest that the funds must be hold for more than 3 years to get further benefits. May be there is a risk of dynamic market but the return in parallel is higher than the low risk instruments. Doing a proper homework and investing accordingly can be very fruitful.

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