2 mins Read | 4 Years Ago

How To Start an SIP To Save Tax On Your Income

How To Start an SIP To Save Tax On Your Income

Investments can be made any time during the year, whether it is a tax saving investment or just to park your excess money in the market. The only problem arises when employers ask you to submit your tax saving plans a few months before the end of the financial year. Here are a few ways you can tackle this with SIP tax saving investment.

Last moment investment can lead to a lot of risks, like picking a wrong product for investment which will not give you the desired results. So, proper planning with SIP can help you to save your taxes as well as get the desired returns on your investment.

SIP as a Tax Saving Investment

SIPs can be a good tax saving investment especially when you need to save a part of your income from taxes. With Systematic Investment Plan (SIP), you can save on your taxes and also get higher returns on your investment.

Under Section 80(C) of the Income Tax Act, 1961, investing in Equity Linked Savings Scheme (ELSS) through SIP enables you to claim a deduction of Rs 1.5 lakh from your taxable income. Whose income fall in the highest tax slab (30%) with SIP in ELSS they can save around Rs 45,000 per year.

Other than helping you to be a disciplined investor by inculcating the habit of auto-investment, SIPs also help you to plan your monthly cash in an effective way.

How to Save through SIP in ELSS

In order to encourage more participation and long-term investment in equity, the Government of India created this tax-deductible category of mutual funds. Along with the tax saving scheme, these ELSS funds also help in long term capital appreciation; thereby making this the most preferred option for tax saving as well as investment.

You can take the SIP route to invest in ELSS that helps you to benefit from rupee cost averaging on a longer horizon. Moreover, with SIP in ELSS you can invest as little as Rs 500 and increase on your investment whenever you wish to.

Start Tax Planning Early

It is always better to start your investment as early as possible in a financial year (month of April) rather than waiting till the end of the financial year and doing a lump sum investment.

This way you can avoid any last moment fanatic investment and also accumulate higher capital on your investment. With an Electronic Clearing Service (ECS) mandate, your SIP amount will be directly deducted from your bank account.


So, planning an SIP initially helps you to benefit from your financial year deadline, lessens the chances of not having enough to invest. Also prevents you from selecting an ill-suited financial asset.

These are few SIP tax benefits that you need to know. Other than these, one can also invest in SIP irrespective of the market volatility. This factor makes it a preferred choice over lump sum investment route.

While choosing your SIP scheme, it’s advisable to be clear about your financial goals, so that along with your SIP income tax benefit you can achieve your desired returns.

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