{"id":9111,"date":"2020-05-04T12:41:32","date_gmt":"2020-05-04T12:41:32","guid":{"rendered":"\/blog\/?p=9111"},"modified":"2024-06-06T06:49:27","modified_gmt":"2024-06-06T06:49:27","slug":"is-elss-a-wealth-creation-tax-saving-tool","status":"publish","type":"post","link":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/tax-saving-investments\/is-elss-a-wealth-creation-tax-saving-tool\/","title":{"rendered":"Is ELSS a Wealth Creation &#038; Tax-Saving Tool?"},"content":{"rendered":"\n<p>Yes, ELSS is an investment that can help you create wealth as\nwell as save tax. Some investors discover this early in their investment\njourney, while others may chance upon this scheme much later.<\/p>\n\n\n\n<p>Shyam was one of the fortunate ones, who found out about ELSS\nquite early on. He had been a disciplined investor for 3 years now. He began\ninvesting right from the time he earned his first salary, and being a\nrisk-friendly investor, equity-oriented mutual funds were his investments of\nchoice. Recently, Shyam earned a well-deserved promotion that brought along\nwith it a steep rise in his annual salary. All was well, until it was time to\npay his taxes. Shyam was surprised to discover that with the huge jump in his\nincome, he had been bumped up to a higher tax slab, and his tax liabilities had\nsignificantly increased.<\/p>\n\n\n\n<p>Resolving to plan better and smarter for the next financial year,\nShyam compared various investment options in order to find a product that\ncombined the benefits of wealth\ncreation as well as tax\nsavings. He shortlisted a few, and from among them, he picked Equity\nLinked Savings Scheme. Since this is effectively a mutual fund scheme, Shyam\nwas glad that he could continue to invest in his preferred investment product\nwhile also simultaneously saving tax.<\/p>\n\n\n\n<p>If this sounds like something you also want to benefit from, read\non to find out how ELSS can help you create wealth while also simultaneously\nacting as a tax-saving\ntool.<\/p>\n\n\n\n<p><strong>What is an Equity Linked Savings Scheme?<\/strong><\/p>\n\n\n\n<p>Equity Linked Savings\nScheme\n(ELSS) is an investment option that can help you save tax as well as aid you in\nwealth creation.\nELSS is essentially a specialized mutual fund scheme where your investment is\nparked in equity and equity-oriented financial instruments. Since it is a tax-saving instrument,\nELSS carries a mandatory lock-in period of 3 years. During this lock-in period,\nany premature withdrawals, whether partial or complete, are not permitted.<\/p>\n\n\n\n<p>To save taxes, you can invest in the right mutual funds on the\nMoneyfy app from Tata Capital. When you invest in an Equity Linked Savings Scheme, you get to\nenjoy several benefits. Some of these benefits are briefly explained below.<\/p>\n\n\n\n<ul>\n<li>It carries the shortest lock-in period\namongst all the other tax-saving\ninvestment options.<\/li>\n\n\n\n<li>You get to enjoy a dual benefit of wealth creation and tax savings.<\/li>\n\n\n\n<li>ELSS tends to give you higher returns in the\nlong run.<\/li>\n\n\n\n<li>You can make either a lump sum investment or\nstart a Systematic Investment Plan to invest in ELSS.<\/li>\n\n\n\n<li>With respect to an Equity Linked Savings Scheme, there are no\ncharges levied for entry or for exit.<\/li>\n<\/ul>\n\n\n\n<p><strong>Additional Read<\/strong>:- <a title=\"Understanding Mutual Fund Terminologies\" href=\"https:\/\/www.tatacapital.com\/blog\/investments\/understanding-mutual-fund-terminologies\/\">Understanding Mutual Fund Terminologies <\/a><\/p>\n\n\n\n<p><strong>How can ELSS help with wealth creation?<\/strong><\/p>\n\n\n\n<p>The equity market has the potential to generate higher returns\nthan many other traditional investments in the long run. ELSS funds invest more\nthan 65% of their corpus in equity and equity-related investment options. This\ngives these funds the ability to let your capital appreciate significantly,\nthereby helping you create wealth. Furthermore, historically, ELSS has almost\nalways generated high returns despite excessive volatility in the equity\nmarket.<\/p>\n\n\n\n<p>While you could choose to withdraw your funds at the end of the\nlock-in period, it is a good idea to stay invested for longer. Thanks to the\ncompounding effect on your investment, your ELSS can maximize wealth creation when you\nremain invested for a long time, say around 5 years or longer. Also, the tax\nbenefit that an Equity\nLinked Savings Scheme provides will also invariably boost your returns\nand savings.<\/p>\n\n\n\n<p><strong>How can ELSS help with tax savings?<\/strong><\/p>\n\n\n\n<p>The Income Tax Act bestows ELSS with manifold tax benefits.\nAccording to section 80C of the Act, investments in ELSS up to Rs. 1.5 lakh can\nbe claimed as deductions from your total taxable income in a financial year.<\/p>\n\n\n\n<p>The profits that you get when you sell your ELSS investments are\ncategorized as Long-Term Capital Gains (LTCG). The Income Tax Act also provides\nan additional tax exemption on such capital gains to the tune of Rs. 1 lakh in\neach financial year. Capital gains derived from the sale of ELSS that are over\nand above Rs. 1 lakh are taxed at a special rate of 10%, excluding cess and\nsurcharge.<\/p>\n\n\n\n<p><strong>Additional Read<\/strong>:- <a title=\"Understanding the Power of Systematic Investment Plan\" href=\"https:\/\/www.tatacapital.com\/blog\/investments\/understanding-the-power-of-systematic-investment-plan\/\">Understanding the Power of Systematic Investment Plan<\/a><\/p>\n\n\n\n<p><strong>Conclusion<\/strong><\/p>\n\n\n\n<p>All things considered, wealth creation and tax saving are among the two main goals of investments. And an Equity Linked Savings Scheme can help you achieve both these objectives with minimal effort. Like Shyam, who smartly tapped into the benefits of an ELSS just when his career catapulted him into the high-tax bracket, you too can leverage the power of this investment option to save tax and grow your capital significantly over the long term. Simply download our Moneyfy <a href=\"https:\/\/play.google.com\/store\/apps\/details?id=com.tatacapital.moneyfy\">mutual fund app<\/a> and make your investments work for you. With the in-built mutual fund scanner feature, you can compare various funds and find the right option easily.<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"http:\/\/trial.rupeetracker.in\/link.html\">Download The App<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Yes, ELSS is an investment that can help you create wealth as well as save tax. Some investors discover this early in their investment journey. <\/p>\n<p><a href=\"https:\/\/www.tatacapital.com\/blog\/investments\/is-elss-a-wealth-creation-tax-saving-tool\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":9113,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[65],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Find Out How ELSS Can Be A Grea Tax Saving Option - Tata Capital Blog<\/title>\n<meta name=\"description\" content=\"Equity Linked Savings Schemes are considered a great wealth creation option and learn here how can you use it as a tax saving option. 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