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A few years back, in the good old bull run, someone advised D to invest in a couple of Equity Linked Savings Schemes (ELSS) in order to avoid having to pay income tax. Taking the advise in good faith, D invested Rs 75,000 in two ELSS mutual funds. Today, after about four plus years, their combined value is a mere Rs 60,000.
Back then, an amount equal to Rs 7,500 (75,000 x 10%) was saved from being paid as income tax, but today, the loss is exactly double of that.
On the other hand, if that income tax was paid and the remaining Rs 67,500 (75,000 – 7,500) was simply kept in a fixed deposit or even just left to idle in a savings account, I wouldn’t be writing this post today.
D still has the original account statements and for one of the ELSS funds I found an entry load of Rs 500-plus for an investment amount of Rs 25,000. Seriously! I doubt if these two mutual funds are going to do any better in future and I’m think of recommending to D to cut her losses now.
Reminds me of something I said about 3-years back — investing just to avoid paying income tax is a really bad idea.
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