Investing in best Equity-Linked Savings Scheme (ELSS) funds can prove to be a wise decision considering the high returns and huge tax savings. However, to make this investment, it’s important to ensure your Aadhaar and Permanent Account Number (PAN) are linked lest you bear the brunt of the Aadhaar-PAN link penalty. This penalty was introduced by the Income Tax Department of India to ensure compliance with the linking of Aadhaar and PAN cards. Currently, the penalty lies at ₹10,000. Now, let us guide you on how to invest in ELSS funds and avoid the Aadhaar PAN link penalty.
An Equity Linked Savings Scheme (ELSS) mutual fund offers tax benefits under Section 80C of the Income Tax Act, with a mandatory three-year lock-in period. It primarily invests in equities, offering potential for high returns but with higher risk.
Step 1: Link your Aadhaar and PAN
First, make sure your Aadhaar and PAN cards are linked. To do this, visit the official website of the Income Tax Department of India, click on “Link Aadhaar” on the left side, and you will find an option to link your PAN card to your Aadhaar number.
Step 2: Decide your Investment Budget
Before you venture into investing in ELSS, decide upon your investment budget. Being clear on how much you can invest can help you wisely pick the right funds to invest in. For instance, if you have ₹1 lakh to invest, you can divide this amount among several ELSS funds.
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Step 3: Research the Market
Conduct thorough research of the market to ensure you select the best ELSS funds. Look at their past performances, fund managers, portfolio companies, assets under management, and return on investment. This will give you a better idea of how the fund has performed and what you can expect in the future.
Step 4: Choose the Best ELSS Funds
After conducting your research, pick the best ELSS funds to invest in. Ideally, a mix of large-cap, mid-cap, and small-cap funds would give a balanced portfolio. You can choose funds like Axis Long Term Equity Fund, Mirae Asset Tax Saver Fund, or ICICI Prudential Long Term Equity Fund (Tax Saving). Remember, the choice purely depends on your individual investment goals, risk appetite, and financial standing.
Step 5: Invest in the Chosen Funds
After you’ve chosen your preferred ELSS funds, the next step is to invest. Most asset management companies have an online portal where you can create an account and begin your investment process. If you prefer the offline way, download the form, fill it up, and submit it at the office of the AMC, together with your KYC documents.
Step 6: Claim Tax Benefits
All ELSS come with tax benefits under Section 80C of the Income Tax Act. ₹1.5 lakh is the maximum amount deductible, which contributes to a significant saving in income tax.
Remember, investing in ELSS has its risks since these funds are subject to the unpredictable nature of the equity market. The rate of returns isn’t guaranteed and might not always be as high as expected.
Investing does not always guarantee a profit. Market fluctuations could lead to potential financial losses. Therefore, it is always recommended that investors do comprehensive research and/or consult with a financial advisor before taking this step. In addition, every investor must keep in mind that their Aadhaar must be linked with the PAN to ensure compliance with the Indian regulatory authorities. Failure to comply might result in an Aadhaar-PAN link penalty.
Summary:
Investing in the best ELSS requires careful planning, starting with linking your Aadhaar and PAN to avoid an Aadhaar-PAN link penalty. Decide your investment budget considering your financial capacity and risk appetite. The next step involves market research and choosing the best ELSS funds. Once chosen, invest in the funds through the online portal of the asset management companies or offline by filling up a form. Lastly, claim the tax benefits under Section 80C of the Income Tax Act, resulting in significant tax savings. Remember, all investments have risks associated with them and thorough research prior to investment is essential. The aim is not to discourage potential investors, but to ensure they are aware of all the different aspects and potential risks of investing.
