Create Wealth and Save Taxes with Axis Long Term Equity Fund

As written on 8^th Feb 2021

Investors who are new to tax planning must understand that tax planning and investment planning go hand in hand. Tax planning should be given priority, and it is better to plan your tax investments well in advance instead of waiting till the last moment. However, what usually happens is that investors end up investing without understanding whether the scheme holds the potential to help them with their financial goals. When you invest in a tax saving scheme, your goal should not be just to save tax but also to earn some capital appreciation in the long run.

If you haven’t decided yet where to invest this fiscal year to save taxes woes, you can consider investing in ELSS or Equity Linked Savings Scheme. ELSS is an equity mutual fund scheme that comes with a three-year lock-in and a tax benefit. With its three-year lock-in period, investors cannot redeem their ELSS fund units for a minimum period of 3 years from the date of investment.

Here’s an example to help you understand how ELSS works

Mr. K works as a senior marketing manager in a private firm with a gross taxable income of Rs.15 lakh. This lands him in the highest tax slab. K chooses to invest in an ELSS scheme as a tax saving instrument and invests a total amount of Rs.1.5 lakh# in this tax saver fund. According to Section 80C of the Indian Income Tax Act, 1961 K’s taxable income has now come down to Rs.13.5 (15 minus 1.5) lakh and he has now managed to bring down his overall tax liability by investing in ELSS scheme.

ELSS comes with a relatively short lock in period

An ELSS scheme comes with a lock-in period of three years. Since investors cannot redeem their ELSS units, any capital appreciation that may have been earned by the scheme gets reinvested. This might actually help investors in growing their invested corpus. Also, the lock-in period of three years the lowest among traditional tax saving instruments. This means that investors can redeem their ELSS scheme units after three years and at the same time enjoy the tax benefit.

Target long-term financial goals with ELSS

Although an ELSS scheme comes with a 3 year lock-in period, investors are not obliged to redeem their units at the end of their chosen investment period. If the ELSS scheme they invested in is performing as per their expectations, investors can remain invested to allow their money to grow over the long term. Equity oriented schemes like ELSS have the scope to help create wealth over the long run, and hence, investors can continue investing in this tax saver fund and target long-term financial goals like building a retirement corpus or buying their dream home.

Start a SIP in an ELSS scheme

Investors keen on saving tax and earning long-term capital appreciation can consider starting a SIP in an ELSS scheme. Seasoned mutual fund investors might be aware of the fact that you can either make a one- time or lump sum investment in ELSS scheme or start a monthly SIP. A Systematic Investment Plan is an investment option for investors to make small investments at fixed intervals towards their ELSS scheme. With SIP, all an individual has to do is complete all the pre-investment formalities like KYC with their bank as well as the fund house and also decide on the monthly SIP amount and date that they intend to invest in. After this, every month on a fixed date, a predetermined amount is debited from the investor’s bank account and electronically transferred to the fund. Long-term investing in ELSS via SIP is known to offer several other benefits such as compounding and rupee cost averaging.

Save tax and create wealth with Axis Long Term Equity Fund

Axis Long Term Equity Fund is an open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit. The investment objective of Axis Long Term Equity Fund is to generate income and long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities. However, there can be no assurance that the investment objective of the scheme will be achieved.

Benefits of Axis Long Term Equity Fund

• Axis Long Term Equity Fund is a diversified equity linked saving scheme (ELSS) that invests in a mix of large caps and select midcaps.
• The fund has a 3-year lock-in* which is the lowest among other tax saving instruments.
• A 3-year lock-in ensures that the money stays invested in equities and does not get perturbed by market ups and downs.
• Being an ELSS scheme, the scheme comes with dual advantage of building wealth and saving tax.
• Investors can target long term goals such as children’s education and their future, retirement or any other long term financial plan.

Investors are expected to consult their financial advisor before investing in Axis Long Term Equity Fund.

*ELSS Investments are subject to a 3-year lock-in.

#As per the present tax laws, eligible investors (individual/HUF) are entitled to deduction from their gross income of the amount invested in Equity Linked Saving Scheme (ELSS) up to Rs.1.5 lakhs (along with other prescribed investments) under section 80C of the Income Tax Act, 1961. Tax savings of Rs. 46,800 mentioned above is calculated for the highest income tax slab.

Finance Act, 2020 has announced a new tax regime giving taxpayers an option to pay taxes at a concessional rate (new slab rates) from FY 2020-21 onwards. Any individual/ HUF opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions. Since, individuals/ HUF opting for the new tax regime are not eligible for Chapter VI-A deductions, the investment in ELSS Funds cannot be claimed as deduction from the total income. Investors are advised to consult his/her own Tax Consultant with respect to the specific amount of tax and other implications arising out of his/her participation in ELSS”

Axis Long Term Equity Fund
An open ended equity linked saving scheme with a statutory lock-in of 3 years and tax benefit

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.