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  • How to Invest in ELSS tax saving funds online

    Published on June 15, 2020

    If you weren’t successful with investing adequately to axe your tax this year, don’t worry. It happens to the best of the lot as most individuals are new to paying income tax and usually wait until the last moment to invest in a tax saving instrument. But the main problem here is that a lot of times, we do not even have surplus cash in hand to invest and this leads us to invest only a small amount and end up becoming the victim of tax deductions. But if you are good with financial planning, you will know that tax planning and investment planning go hand in hand.
    In India, one can legitimately save tax by investing in certain tax saving schemes which are made available by the government as well as private investment companies. For conventional tax payers who are not keen on exposing their investments to the dangers of equity markets, there are traditional tax saving instruments like Public Provident Funds (PPF), life insurance, EPF, etc. But if you are someone who is young with a high risk appetite you may consider the option of Equity Linked Saving Scheme (ELSS).
    What is Equity Linked Saving Scheme?
    ELSS is an open ended mutual fund scheme that comes with a statutory lock-in period of three years. This means ELSS holders cannot redeem or withdraw investments from this tax saver fund for at least three years. Also, ELSS is the only mutual fund scheme that comes with a tax benefit.
    Section 80C of the Indian Income Tax Act, 1961 allows investments of up to Rs. 1,50,000 in an ELSS scheme and claim tax deductions for that particular investment. Here’s an example to help you understand how ELSS works:
    Suppose you are earning Rs. 15 lakhs per annum, this means you are coming under the 30 per cent tax slab. If you invest Rs. 1,50,000 in an ELSS scheme you can bring down your gross taxable income to Rs. 13.5 lakhs. Also, if you invest for the long run, you might even stand a chance of receiving some long term capital gains.
    Having said that, there is no upper limit for investing in ELSS and if you wish you can invest more than 1.5 lakhs per fiscal in this tax saver fund. However, you cannot claim tax deductions more than Rs. 1.5 lakhs.
    How to invest in ELSS online?
    Investing in Equity Linked Saving Scheme online is just like investing in any other mutual fund. There are a few things you need to keep in mind before investing in ELSS. The first thing to do is getting your KYC documentation done. Know Your Customer (KYC) is a mandatory form filling process that requires you to fill in common details like name, age, gender, address, nationality, etc. There are two ways to get your KYC done, you can either collect the form from the fund house and fill manually, or fill the form online. Once you fill the form, you need to get the in-person verification done after which you may start investing.
    Once you are done with KYC, all you need to do is decide how much you want to invest in ELSS and whether you want to make a lumpsum investment or via SIP. If you are starting a SIP, you need to decide how much money you need to invest at regular intervals. SIP or Systematic Investment Plan is a systematic approach where one can continue investing online from the comfort of their smartphone or laptop.
    You can log on to the website of the fund house or AMC you have decided to invest in and start investing in an ELSS fund in an easy and hassle-free manner.
    So now that you know how to invest in ELSS online, plan on investing?