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Tax Saving Funds – The Right Approach

There has been a steady change in investors approach towards tax saving in recent times. Many of them have now started to plan their tax saving well before the deadline approached in March. It is a welcome sign indicating increased financial awareness in nation. Planning to save early has a lot of benefits for the taxpayers – if they start investing in tax saving funds early, they can spend more time and find the best suitable financial instruments for optimum tax saving. If they wait till end, they have little options, and in a rush to meet the deadline, one is always susceptible to make wrong decisions.
One of the most common and effective tools of tax saving is the ELSS (Equity Linked Tax Saving Schemes) mutual funds. These funds are specially designed for tax saving purpose under section 80C of income tax and one can avail a maximum deduction of Rs 1,50,000 during a financial year. This means that if you fall under the maximum tax slab, you can save Rs 46350 during one financial year. Another two big benefits of ELSS are that its returns are higher than other options for tax saving, and the lock in period is lower than all other options.
There are several benefits attached with investing in ELSS through SIP which is the best options for tax saving. Online investing in mutual funds through SIP ensures that you invest your money in fixed amount every month which is a great way to disciplined investment approach. One of the biggest advantage of SIP is that you do not have to worry about ups and downs in the market which is a big cause of worry for all investors. SIP ensures that you invest regularly so when you buy when markets are very low, you get benefit of getting more units in your funds and your average cost comes down. This makes you profitable in the long run.



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