Tax-Saving Options for Starters | Value Research ELSS are an excellent gateway to start investments in equity mutual funds...
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Tax-Saving Options for Starters

ELSS are an excellent gateway to start investments in equity mutual funds...

I am 28-years old and earn Rs 40,000 per month. Since ELSS is considered one of the best tax saving option please suggest the best fund in this category. Should I go for lumpsum investment in ELSS or SIP? What is the future of ELSS if Direct Tax Code is implemented?
- Peeyush Singla

Equity Linked Saving Schemes (ELSS) are indeed superior tax-saving option as they have a small lock-in period (three-years) and a potential of gains. ELSS are an excellent gateway to start investments in equity mutual funds. Like any other equity mutual fund, the best way to invest in ELSS is through SIP mode. You should plan ahead and spread your investments throughout the year to reduce the risk of timing the market. Remember lock-in will be applicable on each SIP separately.

Some of the good performing ELSS are Axis Long term Equity, Franklin India Taxshield, Canara Robeco Equity Tax Saver, Quantum Tax Saving.

According to current tax laws, investments made into tax-saving mutual funds (and some other asset types) are exempt from taxation under section 80C of the income tax act. The exemption follows the EEE principle. EEE stands for Exempt Exempt Exempt, signifying that all three stages of the tax saving investments — the initial investments, the returns earned and the eventual withdrawal are exempt from taxation.

When the Direct Tax Code comes into effect, tax saving investments will be subject to the EET principle. The last ‘T’ means that the eventual redemption of the tax-saving investment will be taxed. Under the EET principle, tax can only be deferred and not avoided.



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