Each one of us has a distinct way of making money. Success is measured in terms of the wealth we possess. In the process you should not forget on how you have gone on to accumulate wealth in the first place. Money does not multiply overnight and you need to work towards enhancing wealth. Quiet often you might have heard invest in the best tax saving ELSS funds. Let us now understand what ELSS funds are in the first place.
As the name suggests it is self- explanatory and points to investment in equities. A tax saving instrument which provides you with tax rebates under section 80 C of the Income tax act. These are rated to be funds that people invest all around the year, but some people consider it as a last investment option in showcasing for the current fiscal year.
The positives of ELSS funds
- A lock in period of 3 years, that is lesser in comparison to the other tax saving instruments
- The rate of returns is high substantially in comparison to the other investment types.
- Any earnings that you do with your lock in period are 100 % tax free
- With the power of compounding you can earn multiples of your invested amount
- No maximum slab is put forth in terms of investment.
The drawbacks of ELSS funds
- It would be really difficult to figure out which fund you need to invest
- The documentation process is very tough at first
- No sort of guarantee exists at first; being equity based fund it is subject to vibrant nature of the market. There is no sure shot formula on whether you are going to earn returns or not
- The mutual funds companies are not going to accept returns from foreign countries like US
- No type of premature deliveries are allowed
In spite of the pros and cons associated with ELSS funds you need to bear in mind that this is a type of mutual fund that has enormous potential to earn returns in the long run. This is an equity based investment plan and you can incorporate a SIP plan. Both of them are virtually two sides of the same coin. With SIP there is no additional form of drawbacks and it does not have any tax implications. Rather it opens up a window of opportunity for anyone who wants to make an investment.
It is not only mutual fund companies but various middle men also invest via SIP. If you really want to gain more information about SIP you can get in touch with the customer care department of mutual fund companies.
Both PF and ELSS are tax instruments that are issued by the government of India. The major difference is between a 2 year lock in period. In case of PFF it is 15 years lock in period and in case of ELSS it is 3 year period. So from an investment point of view ELSS works out to be a better option during the case of emergencies.