4 Smart ELSS Tips For Double Income Families

How double income families can use ELSS to save tax and grow their money through this tax saving investment for future needs like child's higher education and retirement.

Hello and welcome to FundooMoney, your 24X7 buddy for all your money matters. You might be the subject of envy of some of your friends and relatives since both you and your spouse work and are part of a double income household. But are you making the most of your double income? One of the ways to do that is smartly make tax-saving investments since it is likely that both of you would need save tax. It is here that investing in equity linked savings schemes (ELSS) offered by mutual funds can come in quite handy.

As some of us know that ELSS not only allows tax deductions for investments up to Rs 1.5 lakh under Section 80C, but being an equity fund, your money gets invested in equities. Like all equity funds, over the long-term i.e. 8-10 years or more, they typically provide high returns. But how does a double income couple smartly invest in ELSS? We provide 4 smart tips. That’s coming up shortly.

Decide your financial goals
You need earmark your ELSS investments for common or family financial goals such as retirement or child’s education. You can even divide the responsibilities amongst yourselves. For instance, you could invest in ELSS earmarked for your child’s higher education while your spouse invests in ELSS for retirement.

Don’t buy too many ELSS 
Make sure you don’t make the common mistake of buying too many ELSS. It doesn’t help at all. Investing in 3-4 schemes—same schemes for both of you— would suffice.

Choose different SIP dates
One great way of taking advantage of investing in equity markets is to invest on different days. When you take a systematic investment plan (SIP), you get to do that since you are investing every month. When you and your spouse have different SIP investment dates for the same schemes, the advantage gets doubled. The advantage of low average cost of buying units in the long term due to SIPs gets reinforced.

Invest the right amount 
At the end of the day, ELSS is still a tax-saving mutual fund and a tax saving investment. Invest the amount that provides tax deductions under Section 80C. Remember, other items such home loan repayment, children’s tuition fees, provident fund deduction, all qualify for annual tax deduction of up to Rs 1.5 lakh under Section 80C. Same is true for existing investments in other tax-saving investments such as Public Provident Fund (PPF) and life insurance plans.

Find out the investment amount eligible for tax deduction and invest accordingly. This will help you to invest the right amount in ELSS. Once the tax deduction limit is exhausted, you and your spouse can invest in other consistently performing equity funds to meet the financial goals.

We hope you found this useful. Do share with us and others on the channel your tips for smartly buying ELSS, by writing in the comments section. For more such actionable personal finance information and regular uploads, subscribe to our channel. Also, visit our website, download our mobile app and stay connected with us on Instagram, Pinterest and Slideshare.