Selecting the right ELSS for saving tax and meeting long term goals: Know the factors

The new financial year 2021-22 has begun and it is time to plan your tax liability for the year. Government allows taxpayers to invest in certain specified investments and reduce tax liability for the year.

One such tax saving investment is equity-linked investment scheme (ELSS) which is a type of equity mutual fund but with certain characteristic features. ELSS helps an investor reduce one’s taxable income by the amount invested and thereby reduces tax liability. Importantly, link your investments in ELSS to a long-term goal like children’s education, marriage, home buying or one’s own pension needs. Let us now see what ELSS schemes are and how they help in tax planning and cut your taxes for this financial year 2021-22.

What are they?

As the name of the scheme very clearly suggests, it is a savings scheme that’s linked to equity. Investment avenues for your savings can be a mix of various asset classes like equity, debt, gold, real estate etc. ELSS is a type of mutual fund, which similar to any diversified equity mutual fund routes investments into the equities.