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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Make use of ELSS

Posted by Muthu on December 23, 2014

All of us have tax savings option of Rs.1.5 lakhs per annum under Sec.80C. Please use the limit fully. Do not let it go unutilised. If you already have life insurance premium, principal repayment of housing loan, EPF or PPF etc., please subtract those from the above the limit and invest the balance in ELSS (Equity Linked Savings Scheme).

ELSS is like any other equity fund. Since they confer tax benefit under Sec.80C, there is a lock-in period of 3 years. Anyhow, as we suggest investing in equity funds for not less than 10 years, this lock- in is not an issue. As with any other equity funds, we suggest adopting SIP route and having an investment tenure of at least 10 years.

Self employed people and others who do not have any other savings under Sec.80C may opt for a SIP of Rs.12,500 per month.

I give past performances as an example to inspire and given an idea of return potential. As I always tell you, past performance may or may not be repeated in future and mutual funds are not a guaranteed product.

Let me give you today an example of HDFC Tax Saver.

According to Valueresearch tool, this fund first declared its NAV in June 1996. Let us assume you started saving Rs.12,500 every month in this scheme from June 15th 1996 till December 15th 2014. You would have invested Rs.27.87 lakhs over 18.6 years (223 months). The value of the same as on date is Rs.7.21 crores. This works out to an annualised return of 26.24%.

By disciplined and committed investing, see for yourself the possible potential. In ELSS, not only you get Sec.80C benefits; as like any other equity fund, the long term gains are also completely exempt from tax.

Considering the long term growth potential of our country, economy and markets; all you’ve to do is disciplined and regular investing. ELSS offers one such avenue for you.

Make use of it.

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