Choose equity linked savings schemes after proper due diligence

MUMBAI: Most investors start thinking about tax planning only at the end of the financial year and to tap this demand, several fund houses are lining up equity tax saving funds or equity linked savings schemes (ELSS). As of now, four fund houses — DHFL Pramerica, Mirae Asset, Peerless and Sundaram — are in the market with ELSS new fund offerings (NFOs).

If you have not done your tax planning for the year, ELSS is the best option for various reasons. Since equities usually generate better returns in long term, ELSS will help you not only to save tax but also generate long-term wealth. Raghvendra Nath, managing director, Ladderup Wealth Management, argues: “This is the only tax saving instrument which provides participation in the stock market upside.”



Another advantage is the smaller lock-in period. While most instruments under Section 80C carry a fiveyear lock-in period, these funds come with a three-year lock-in period. Mumbai-based financial planner Pankaaj Maalde says ELSS should be the preferred tax-saving investment for a five-year or higher time horizon, as it allows investors to invest regularly by setting up a systematic investment plan ( SIP) in the scheme. “Any balance remaining in 80C basket after the housing loan principal repayment, if any, and mandatory EPF contribution should be directed towards ELSS,” says Malde.