TAX SAVING 5 Mistakes To Avoid in ELSS & NPS

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Here we are helping you to save some taxes during your college days. And we never study, we always study one day before the exam.

So the same way we need to save some money for tax and at CCD like that.
We never save anything throughout the year, and only we go and look for some investments towards the end of March.

Now it is the end of March, we have another only one week, and so many of you must be ready to do something that some smart people would have done already.

Most of us will be doing it only at the last minute.

2 Tax saving Instruments

So we are going to talk about two things.
And one is an equity-linked savings scheme. Another one is National Pension Scheme.

Before investing in an equity-linked saving scheme or National Pension scheme.

It gives 360-degree financial planning and managing of our portfolio. whether you are investing in NPS so they don’t charge any commission.

What is ELSS?

ELSS stands for Equity Linked Saving Scheme. That means investing in ELSS mutual funds and claiming the tax benefit.
there is a section called ATC where up to RS100 you can invest, and you can claim that tax. That means you don’t have to pay tax for this one and a flag rupees.
Generally, people working class will already have some Providence fund so Providence fund already comes under ATC.

Most of the people who are not working, or doing some business, may not be having Providence funds, and if they want to go conservatively, and don’t want to take risks, they can invest in a public provident fund.

If they have a faith in the stock market, if they think that our economy will do very well in the future, our stock market will do very well, so they can also invest in equity length saving scheme.

So this is a mutual fund, and there are so many mutual funds you can choose any one of them, you can invest there.

1- Starting late to invest in ELSS

Mainly people me looking to invest only in the last week of March to save the tax and then what to do?

We go put the entire $1.5 in the last week and a risk so what if the market crashes from here?

That is called timing risk, and if you don’t want to have a timing risk in the best way?

Suppose you want to invest about Rs1.5 in Els it’s better to invest Rs2500 every month through Sip, so when you do like that what is the purpose of SAP?

Why do people do SAP instead of putting one lump sum it takes care of the market volatility up and down averages out this year which may be too late. You cannot do this if you want to do a lump sum investment from the next financial year every month about Rs12,500 in ELSS.

2- New ELSS Fund Every Year

what people do people do in the HDFC ELSS fund this year?

Next year they go on ICS Alsss fund and the next year Axis Alsss fund so they keep changing every year one year they see this is giving better performance and next year that is giving better performance they keep changing that so I will advise you not to do that because having too many fence monitoring them is going to be very difficult so you do research.

You choose a fund and stick to that one fund every year so that monitoring will also be easy most of these funds tend to give more or less the same return only instead of having too many funds just have one fund invested.

3- Invest Short term for three years

when you invest in ELSS there is a minimum lock-in period of three years so only we’ll get the tax benefit.

Once the three-year lock-in period is over people tend to draw from the ELSS scheme, and remember though you are investing in this Els fund for the tax benefit.
That is still a mutual fund, and mutual funds tend to give a good return only for a longer period. Let’s say eight to ten years of the mutual funds would have delivered about a 12% return over a longer period.

Whereas if you have put the money in bank FB you would have got about eight to 9%. That is a mutual fund so though you are investing here to save the tax but a mutual fund even after three years.

You can hold on to it you keep it as a long-term investment to get that benefit instead of redeeming it after three years.

4- Wrong Selection Of ELSS fund

the fourth mistake people do they choose some wrong funds some Alssess funds will invest in mid-cap.
Some small caps. Some also funds will invest only in the large-cap, depending upon your age.

For your risk profile, you have to choose the fund accordingly suppose.
I don’t want to take a risk and then choose that investment in large-cap funds endgame.

You can take more risk to choose an ELSS fund that is investing in small cap and make cap funds, so see your risk profile.
Accordingly, you choose the fund don’t think that by putting in a small cap fund to get a bigger return, and small-cap funds do give a better return in a bull market, but they do negative returns in a peer market, so know your risk profile and accordingly choose the fund.

5- Invest only in the best performer

Many people want to invest in ELSS just to look at last year’s performance and which fund has given the best performance.
They tend to invest in that ELSS that’s not a good idea because last year there is no guarantee for next year’s performance instead of checking just last year’s performance.

You check their performance over the last five to ten years and check the performance of the market or Nifty or sincere and check the performance.
See whether they outperform the market over a longer period Choose one fund which is a good fund and stick to that fund don’t keep changing the funds and while choosing that one fund does your research.

You choose the best fund, so these are the five pieces of advice for ElSS.

Now come to the second one assume that you have already invested 1.5 crores to get ATC benefits and an additional $50,000 you can invest in the National Pension scheme.

That will also be eligible for tax benefit so this is 80 CCD additional $50,000, and what a national pension scheme is a pension scheme.
You can contribute some money, and then at retirement age get the benefit in a lump sum.

But I would like to tell you that even though you are contributing every year at the retirement age you cannot withdraw the entire money withdraw up to 60%.

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