SMART MOVES WITH ELSS

Taxpayers often face an annual dilemma—they find themselves short on funds to deploy towards tax savings. With ELSS, there is a way out of facing this challenge for perpetuity. All one has to do is follow the strategy of investing for three consecutive years to find future tax-saving investments to be automated

➘ For instance, if you have invested Rs 1.5 lakh towards tax savings in ELSS in each of the three consecutive years, the first year’s investment will complete the 3-year lockin in year 4 and once the sum is redeemed, you can deploy the same towards tax savings in ELSS for year 4. You do not need any fresh money towards tax savings in year 4 as you will have the redemption of the money invested in year 1. The same logic works for the money invested in year 2, which will be available in year 5, and the money invested in year 3, which will be available in year 6

➘ So you do not have to worry about creating funds to save on income tax after the first three years. What would happen in a year when the value of the ELSS investment goes below the sum one invested three years earlier? The chances of such an occurrence are rare going by the data from the consistently performing ELSS over the years. Even if you face such a situation in a particular year, the shortfall to meet the Rs 1.5 lakh limit is unlikely to be huge and can be planned for

➘ With this strategy, you don’t have to worry about tax savings every year and can focus on longterm financial goals. You have created cash flow in a way that your tax savings are almost automated and your surplus savings are deployed towards achieving other financial goals