This is how much money you can lose for investing in tax-saving ELSS at last minute
Premium- Last minute investment in ELSS to avail tax deduction is a sign of financial indiscipline. In a way, it's going to disturb your monthly cash flow
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Apart from being a tax saving tool, ELSS is also a great financial instrument to create wealth in the long term. However, being preferred more as a tax-saving tool, most investors keep hanging such investment till the last minute.
Arijit Sen, SEBI Registered Investment Adviser and co-founder of merrymind.in, said, “Last minute investment in ELSS to avail tax deduction is a sign of financial indiscipline. In a way, it's going to disturb your monthly cash flow."
“Investing in ELSS does not mean that you're saving taxes only. It's an avenue to meet your financial goals. As financial goals cannot be met by chance, it has to be planned accordingly," he added.
For example, Mirae Asset Tax Saver is one of the best funds in the category. Now, by investing ₹1.5 lakh on 31 March, 2021, you would have saved taxes under Section 80C.
But, if you would have invested the same money on 1 April, 2020, when the NAV of the fund was ₹13.28, then the corpus would have grown to become ₹2.87 lakh on 31 March,2021 (NAV was ₹25.42).
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So apart from saving taxes, you could have also earned returns up to ₹1.37 lakh.
“Market movements are beyond our control. Lump sum investments tend to fail to sail the tides of market volatility. Spreading your investments across 12 months will have the potential to mitigate market volatility to a great extent over time," Sen added.
So owing to this advice if you had spread your investment over the period of 12 months, i.e. ₹12,500 every month, then your investment would grow to become Rs2.05 lakh on 1 April,2020.
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There would be 3 advantages for investing the money through SIP: Saving taxes, wealth creation and since the investment is spread across 12 months, it does not pinch the investor's pocket.
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