Do you often find yourself wondering if you are implementing the right procedures to save tax? Worry not; you are not alone. Every year thousands of investors are on the lookout for investment options under Section 80C to reduce their tax outgo. However, as an investor, you should look for investments that not only help to save tax but also accrue wealth over time. Before choosing the right investment option for you, you might consider numerous factors such as liquidity, lock-in period, and safety before opting for the right tax-saving investment for your portfolio.

Where should you invest to save tax?

Let’s assume that your income is still taxable after taking all factors into consideration. In that case, you might consider investing in different tax-saving investments.

As an investor, you can choose from several 80C investments such as ELSS (Equity-Linked Savings Scheme), National Savings Certificate (NSC), Bank Fixed Deposits (FD), Public Provident Fund (PPF), etc. Among all the tax-saving investments, ELSS mutual funds enjoy the lowest lock-in tenure of just three years, as opposed to five years and fifteen years lock-in period by fixed deposits and PPF respectively. ELSS funds are commonly known as ELSS tax saving mutual funds as they are eligible for a tax deduction of up to Rs 1.5 lac under section 80C of the IT Act, 1961. Investments in ELSS mutual funds can help you to save up to Rs 46,800 each year. ELSS funds offer dual benefits of high potential of wealth creation and tax-saving attributes to investors. Let’s understand why ELSS funds are the best way to save tax.

Prominent features of ELSS mutual funds:

  1. A minimum of 80% of the fund’s total assets are invested in equity and equity-related instruments
  2. There is no upper limit to invest in ELSS. You can allocate any amount you wish to invest
  3. ELSS tax-saving funds have a compulsory lock-in tenure of three years, which also happens to be the shortest lock-in period as opposed to other tax-saving investment options
  4. As an investor, you can avail for a tax deduction of up to Rs.1.5 lac u/s 80C
  5. You can choose either the dividend or the growth option at the time of investing in ELSS funds
  6. ELSS funds have the potential to yield noteworthy returns. However, at the same time, the returns are not guaranteed on these mutual funds

If you are new to the world of investing and are wondering how to invest in ELSS, here’s how you can do it. You can easily invest in ELSS funds, either through a designated mutual fund distributor or directly from a fund house.

Note that, selecting the right ELSS fund(s) for your portfolio is equally essential. It is always to take the services of an expert or a financial advisor who has a established track record of beating the markets and generating significant returns. Remember, past success is not an indicator or promise for future success. Happy investing!

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