Mutual Funds Day 14: Tax Savings Option. ELSS Funds.
When you buy stocks, it is mainly considered an investment. Investment in stocks is what people do with their disposable income i.e. the amount left after consumption & savings. And investments rarely give a TAX benefit. Only one investment product in India gives you exposure to Equity and saves Rs1,50,000 per year of taxable income. This product is called ELSS (Equity Linked Savings Scheme).
This applies only if the Investor has selected the old Tax-Regime under the 80(c) category. If you are just starting your career and would like to claim the Tax break, then ELSS could be the right product for you.
- The lock-in period is only 3 years. The first installment will be unlocked for redemption at the end of 36 months.
- Direct Equity Exposure. At least 80% of total assets are invested in direct equity.
- Learn Discipline. A lock-in of 36 months will discourage you from redeeming too soon and give you the patience to hold on.
If you are just starting your career, then ELSS could be the perfect first Mutual Fund investment for you. A monthly investment of Rs12500 will help you fill-up the 80(c) quota and ensure you get the exposure to build long-term wealth.
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