5 steps to follow for investing in ELSS mutual funds

Equity-Linked Savings Scheme (ELSS) is one of the most comfortable tax-saving instruments in India. Every year investors try out various options as mentioned in section 80 C of the income tax act to save on taxes. Best ELSS mutual funds are easy to manage, have three year lock-in period, and can be taken as a SIP. Investors can save up to INR 150000 through ELSS funds. This scheme not only helps save taxes but also helps in using the amount collected for future requirements. Therefore one must always be prudent and choose the best ELSS mutual fund and manage their finances the smart way.

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Steps to follow for investing in ELSS mutual funds:

Once an individual has made up his mind of investing in ELSS funds to avail tax benefits, the next steps are to analyze the most suitable scheme as per his requirements and annual income. Following are some steps to follow to invest in the best ELSS mutual funds:

1. Determining the tax slab and taxable income: The first step for investing in equity-linked savings scheme is to analyze the tax slab and the taxable income. This helps in saving the maximum tax using the most suitable ELSS scheme. Investors can save up to INR 45000 by investing in this scheme. Thus it is essential to know the exact tax slab and income taxable to decide the amount to be invested and the scheme to be chosen. The various tax slabs and the tax % liable are mentioned below:

1. Picking the best ELSS mutual fund: The next and broadly, the most critical step is to select the ELSS fund that best suits the investor’s income and requirements. There are a few basic things that should be kept in mind while choosing the best ELSS mutual fund.

Past Performance: Past performance of the funds is an excellent barometer to estimate the likelihood of a scheme generating high or low returns. Though a good performance in the past does not mean an excellent performance in the future, it indicates the ability of the scheme to bear with market fluctuations

Consistency: Another way to analyze the funds are to look at their consistency. For investors who have a horizon of medium to long term, looking at the consistency in the performance is very crucial.

1. Investing Offline/ Online: Once the groundwork of decision marking and selecting the best ELSS mutual fund is complete, one can start investing in the scheme online. Click here to start investing now. It is a good idea to invest through an intermediary. The various options available to invest are:

Through a mutual fund distributor – These distributors can help in completing the documentation concerned with investing. They do not charge any additional fee but charge a commission from the mutual fund companies instead. One should first select the ELSS scheme and then take the help of these mutual fund distributors.

Through online distributor – There are several mutual fund distributors online who can help investors in their journey without charging any additional cost. Taking the help of these distributors makes tracking and managing the funds very easy.

1. Choosing between SIP investment and Lumpsum Investment: Choosing between SIP and lumpsum is yet another significant decision investors need to make. Generally, SIP is recommended to investors as it saves them from a load of investing all the amount in vitality and gives the benefit of averaging. Investing all the amount in a lump sum at the end of the financial year is not a good reason as it puts a massive risk of negative returns on the investors.
2. Redemption of the ELSS funds: The ELSS funds come with a lock-in period of 3 years. The investors can simply fill the ELSS redemption form and get the amount redeemed in their bank account in around 3 business days.