A blog on tax saving (elss) and that too in April? Sounds misplaced, isn’t it? Few years back, we were also of the same thought. After having undergone the pain of declaring, investing, submitting proofs or having forgotten about all of it all, there is one mistake that you should definitely avoid in 2017!
For starters, what is section 80(c) of the income tax act that everyone gets excited about Dec-Feb every year?
The government of India gives you an option of getting a deduction of 1.5 lakhs of your income. Plus a little more on 80D, 80CCD, 80G. All put together you can save upto 50–60K per year in tax out go! It is exciting for us and we wrote about it some time back.
That sounds cool! So what do people do about it?
Most of us wake up in December. Make frantic calls to friends, family and well wishers who might ask you to invest in PPF, FDs etc. At times, we end up calling our bank manager or the uncle who is an LIC agent (Never do that because they will try to sell a ULIP/ Endowment fund to you)
With the deadline looming large, you take what is accessible.
What do the smart cookies do?
Some smart cookies (these guys are really smart about money — we should have these guys on speed dial) decide to invest in Equity Linked Savings Schemes . See the table to checkout the historical comparison and the Top ELSS funds here.
What is the mistake that most people (including the smart cookies) make?
Making all your ELSS investments at one shot at the end of the year is the biggest mistake that most of us make.
The ideal thing would be to spread it through the year. This has two advantages:
- Spread the risk on the ups/downs of the market through the year like any Systematic Investment Plan
- You do not run out of money to invest because of over spending!
In place of making all your investments at the end of the year, one should spread them equally through the year. For e.g., if the investment you can make in ELSS funds is 1.2Lacs for the year, make a monthly investment of 10K per month.
So, what next? Set up your SIP in the best performing ELSS funds — See how much do should invest and start investing.
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