How to invest in ELSS funds when you don’t have the money
If you’re reading this, then chances are that beating the summer heat isn’t the only thing you are concerned about this month. Yes! It’s the month of the Tax Man.
You have only until the end of the month to claim a deduction of up to Rs. 1.5 lakh from your taxable income by investing in ELSS funds (or other Section 80C instruments). But if you are not doing this either because you don’t have enough savings or because you want to invest your money elsewhere, here’s something that you might want to do.
Let us say you start investing in an ELSS fund. You put in Rs. 1.5 lakh each year for three years. By the end of three years, you would have invested Rs. 4.5 lakhs.
In the fourth year, the money you invested in the first year would have completed its 3 year lock-in period. You can withdraw this money and invest it again in the fourth year. Similarly, you can redeem your second year’s investment and re-invest it in the fifth year. The rollover can continue as long as you want. This way you’ll continue to avail your tax benefits without putting in any extra money from the fourth year.
If you don’t have the full Rs. 1.5 lakh this year, don’t wait to accumulate your savings. You can start with what you have and add the remaining in the year you are rolling over your investment. In fact, in the three years, your initial investment would also have grown and you might not even need to add too much to meet you Rs. 1.5 lakh limit.
Investing Rs. 1.5 lakh every year is a great way to build wealth while saving tax. If for some reason you’re running short of money or don’t want to invest more in ELSS, re-investing your money every three years can be a smart thing to do. But rolling over your investments every three years is not a substitute for building your investments every year.
