Simple ELSS Hack: Tax Savings that sponsor themselves

With this simple ELSS Hack, within 3 years your ELSS investment requirements will start taking care of themselves.

Yes, your ELSS can sponsor itself. 

Set up an SIP in the ELSS scheme of your choice for say 10 years. In the 37^th month, start a Systematic Withdrawal Plan* (SWP). The SWP should be in the same scheme for the same amount for the remaining period of the ELSS SIP, in this case, 7 years.

The lock-in on ELSS Investments ends after 3 years. So, you are free to withdraw the number of units purchased 36 months ago.

With this strategy, your 1^st month investment is withdrawn in the 37^th month and pays for the 37^th month ELSS investment. In effect, your Tax Saving ELSS investments become self–sustaining without requiring a fresh contribution from your income.

So, go ahead and use this ELSS hack. As long as the ELSS scheme’s NAV is above what it was when you invested 3 years ago, your tax savings will be on auto-pilot.

ELSS investments are a very important investment option for tax savings. You can read about how does ELSS fare better than other tax savings options. And find out how much should you invest in ELSS schemes.

What do I do with the extra money I save?

You can now think about investing the surplus amount that you will now not need for ELSS. Put them in a wider selection of funds. Choose funds that have no lock-in, fewer restrictions and possibly offer better returns than ELSS schemes.

* A Systematic Withdrawal Plan allows you to redeem a pre-specified amount or units regularly (monthly) from your investments in a particular scheme.

Invest in the ELSS Funds that feature consistently in “Best Mutual Funds” list across the web here.