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Major benefits of tax saving mutual funds
Tax planning is one of the most hassling activities for any individual who is an earning citizen of a country. If an appropriate plan is not made for the allotment of funds and probable capital gains, then it can lead to a very negative impact on the person’s finances. This process includes a careful assessment of all the sources of income and points of expenditure, probable investments, returns earned on those investments, etc.
Most people make investments as to set-up a means of increasing their earnings. These investments can range from instruments of the capital market, bonds, mutual funds, government schemes among many other readily available investment instruments.
A prevalent practice that is gaining popularity nowadays is that people have started investing in investment plans which help save tax or get tax-free returns. This helps the investor in getting the maximum financial benefit out of his investment.
Then most popular sources of tax-free income generation are-
All of the above-mentioned options for investment provide a tax benefit of varying amounts.
Out of the given list, equity-linked saving schemes have gained a lot of popularity among probable investors because of its various features and benefits.
ELSS is a type of mutual funds investment that offers the investor lucrative tax benefits along with a good return on investment.
To understand ELSS a little better, it is very important to understand the significance of mutual funds. Mutual funds are investment options for investors who wish to balance the risk and returns of their investment. The amount invested in a mutual fund is further allocated to trade in securities by professionals. More features of mutual funds can be ascertained from the following information.
Equity Linked Savings Scheme (ELSS)-
It is a tax saving investment scheme for individuals who wish to invest in mutual funds with an opportunity of multiplying the investment. The investor has an option to pay the invested sum in a lump-sum amount or through the means of a systematic investment plan (SIP). In SIP, the investor has the ease of paying the invested sum in fixed installments over the tenure of the plan. This makes it hassle-free and economical for the investor.
ELSS is the most favored mutual fund investment instrument available in the capital market at present. The various features of ELSS are-
Benefits of investing in ELSS through SIP-
Thus, it can be inferred that the rate of return earned by an investment in ELSS through SIP is higher and tax-free and has marginally lesser risks. Also, the maturity period is shorter than most investment options, making it a more favored and popular investment option.
For the sake of reaping maximum benefits out of this type of investment, it should be started well-in-advance. While choosing the appropriate ELSS, more trust should be placed on providers who have consistent growth patterns and not random fluctuations in their financial charts.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.