Spend, Save and Invest Smartly
Aren’t there those times when we see all those beautiful and pricey items in a mall and say. Oh if only we could purchase them, Things are so costly these days. I have no money in my pocket. All my money gets spent literarily before it reaches my pocket. What Should I do About This?, Fortunately the Government of India encourages savings and we have Equity Linked Saving Schemes which are tax deductible as per Section 80 C of the Income Tax Act. Mustn’t we all make use of this unique instrument in order to not only save our taxes but also increase our returns over a time frame. Here I would like to remind you that the team of Financial Planners at Moneymindz.com is always ready to plan your tax saving needs in an efficient manner, You can explore this unique free advisory service by giving a missed call at 022 6211 6588.
This is basically a dedicated mutual fund scheme which invests in Shares/ Equity and comes with a lock-in period of 3 years. Here you can invest a sum of INR 1 Lakh in an ELSS Scheme and claim deductions under Section 80 C of the income tax act of 1961
If you are then Equity Linked Saving Schemes are not your “Cup Of Tea”. Here if you noticed in the year 2008 after the USA Sub prime lending and Mortgage Housing crisis the market was in shambles. The market rose like a phoenix subsequently after 2009 and this was followed by the Sensex reaching very high levels of 19000 to 20000.We had a phenomenal rise in the prices of commodities such as Gold and Crude oil in this period. There is a general belief that in the years to come the commodities and inflation levels will come down which will help improve our Current Account Deficit and improve our GDP. We recently saw a crash in the price of Gold and other commodities..A person who has stayed invested in the market knows about the ups and downs that exist in the markets. Here longer we stay in the market greater would be our gains, Here since ELSS have a lock-in period of 3 years they are able to tap the benefits of staying invested in the market. So it is very necessary not to lose heart when market returns crash and an ELSS can be retained by the investor even after its lock in period has lapsed.
Here the market has been very volatile in the last 5 years. Here even if we are going for the tax saving benefits of an ELSS it is better to follow an SIP (Systematic Investment Plan ) where small portions of investments are made say on a monthly basis for a period of one year with amounts around INR 3000 per month. This translates to an investment of INR 36000 per annum which goes towards the tax saving deductions as per Section 80 C. During the period of one year the market might have fluctuated and been highly volatile in this period. However as we stay invested over a long period of time we are able to reap the benefits of these Equity Linked Mutual Funds. This is much better than investing a lump sum in a single month as the market value may be very high in that period.
We have an ELSS Scheme which has a shorter lock in period when compared to a PPF or an NSC. Here imagine the plight of a fund manager who has to make redemptions on a daily basis. How will he manage the fund? Here the lock in period prevents short term money from flowing into these funds. Here short term money looks for quick returns and will not consider a lock in of 3 years. This helps the fund manager to stick to his goals and targets and return value for the investments put in.
Here we get tax deductions under Section 80 C along with higher returns than say certain other equity related financial instruments. Here ELSS have a long time horizon and tend to perform better than Equity Diversified mutual funds over long periods of time. They are also better than plain Equity funds as they combine tax benefits along with good returns. Here generally it is not advisable to time the markets. However in periods when the market is down but the outlook positive it is good to invest in an ELSS.
Here the returns of the ELSS are governed by market related forces. The returns here are higher without any upper limit or a ceiling. However in PPF, NSC and so on the returns are fixed.
Here an ELSS is like a gift from the government to the youth of the country. This not only has tax saving benefits but also gives good returns. Let us not look this “Gift Horse In The Mouth”. Now it is up to us to make use of this horse by riding it. We do need to do the groundwork and analyse and choose the best ELSS to tap these returns. You can look up the website MoneyMindz.com in order to learn about ELSS and your tax saving needs