Why ELSS Is Still Better Tax Saving Investment Option In India

With mutual funds you are enjoying the benefits of the stock market along with the low risk of your capital. Last month we've posted on How you can earn more with SIP in mutual fund post LTCG . As ELSS is special category of mutual fund you'll enjoy the same benefits in the ELSS also save on tax.
I've listed some of the benefits on why should you choose ELSS over other tax saving instruments.
I've listed some of the benefits on why should you choose ELSS over other tax saving instruments.
Why ELSS is still better tax saving investment option in India
Lets see the various tax saving instuments and their respective lock in period.Why ELSS
1. Higher returns on your hard earned cash
Since ELSS funds entirely invest in stocks, they are best placed to earn better inflation beating returns. Other debt instruments can give about 8% of returns, investing in equity may produce higher returns in favorable situations in the stock market. In the rising economy like India, a good ELSS fund with quality stocks may reap higher returns.
2. Lock in period:
Biggest advantage of ELSS is the lock in period. You have to stay invested at-least for 3 years this gives fund managers guarantee of available funds; after completion of 3 years, you can redeem part or whole of your ELSS at any time. When you're invested for long time stock market always outperform on all other investment options or loan taken.
Disadvantages of ELSS funds
3.Low Minimum Investment
If you wish to enter into the stock market, you can do so with ELSS as the minimum amount for starting SIP in ELSS fund is only Rs.500/- which is affordable to all.
4. Taxation
Corpus that you've invested can be claimed under section 80C also you enjoy tax free dividendsfrom these ELSS
1. No Capital Gain Benefits
As per the Budget 2018-19 ELSS will not be taxed with Long Term Capital Gain at 10%. With this the return on the investment becomes taxable but any kind of dividend received are still non-taxable. This becomes disadvantage of the ELSS, but you'll not mind to pay tax if you received returns higher than that of other traditional options.
2. Your Capital is on Moderate to High Risk
One can not claim any type of guaranteed returns because ELSS earn from investments in the stock market. However, on the long run equity market have outperformed all other asset classes. The key to successful mutual fund investing is one has to choose good ELSS and stay invested for the long term. In previous post we've explained how you can get home loan with almost 0% interest with investment in SIP / Mutual Fund.
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