When it comes to tax saving, an investor must bear in mind that not all S.IPs are tax-free. Under the tax-free hoarding, you can opt for Equity-linked savings schemes, Public Provident Fund, Employee’s Provident Fund and Unit Linked Insurance Plans.

Out of these, ELSS is a scheme that offers tax benefits under Section 80C of the Indian Income Tax Act, 1961. Investors can claim tax exemptions on the principal amount of up to Rs. 1.5 Lakhs. To add to this, the returns earned on these funds is also exempted from taxes under Section 10.

Although these plans have limited tax benefits, they can help you build a huge corpus in the long term!

Benefits Of SIP Investment

• It inculcates a sense of discipline, as the investor invests a fixed amount at regular intervals. Regular investment with good returns is a reason enough to keep investors hooked on to this instrument.
• It helps you mitigate the risks of investing in the stock market. When the market is facing a downturn, your monthly instalment will give you a higher number of units than usual and when the market is trending upwards, you can earn more on the existing investments easily.

Keep in mind that the sooner you begin investing in small amounts, the higher will be your corpus in the long term. The returns expected differ based on the kind of scheme you opt for. So, stay vigilant of the investment objectives when you are looking to invest in mutual funds through an SIP.

Also Read:

Is Demat account required for SIP?

How to select top performing mutual funds?