| December 09
Good Time to Invest in ELSS
Tax saving is one important part of our
financial career, managing tax efficiently is an art, if you can expertise that
most of your financial issues could be resolved. When it comes to saving taxes
most of us wait till the month of March because we continue our habits to push
everything to the last day of submission like our school time assignment. Most
of us end of in the paws of wrong products just because we want to get over
with this. This specially happens to the investor who have just started working
and may not have much knowledge about investment or tax saving.
So before taking any decision further, please
review one of the most popular tax saving option i.e. tax saving mutual funds.
Mutual fund has become the top choice for the
investors when it comes to fulfil their financial goals.
What is ELSS?
Meaning of ELSS is Equity Linked Savings Scheme; it’s a category of
mutual fund which helps in saving taxes. ELSS offers you dual advantage of
capital appreciation as well as tax saving under section 80 C of Income Tax
Act. ELSS fund comes under equity category (open ended) which means more than
65% of the money is invested in equity. One can save taxes upto Rs.46,800*/-(*Considered
30% tax bracket includingcess>) under section 80 C. ELSS fund have two
options of investment:
- Dividend (includes dividend reinvestment and dividend pay-out).
An individual is not liable to pay tax on the dividend
received from mutual fund if the amount is below Rs.10 lakh. But if the amount
exceeds this limit the investor has to pay 10% of the total earnings as tax
during a particular year. On the flipside, the government has made it mandatory
for companies and mutual fund houses to deduct taxes from the dividends
distributed before disbursing them under section 115-O of the The Income Tax
Features of ELSS funds:
Lowest lock in period: There
are other tax saving products available in the market like PPF, NPS or FDs and
so on, however all these products have a lock in period of more than 5 years.
ELSS is one such product which gives you tax benefit with just a minimum lock
in of 3 years.
Tax Saving: ELSS
is a kind of mutual fund which provides deduction of upto 1.5lakhs from total
income under section 80C
Dividend and growth: one
can choose to invest in either dividend or growth option depending upon the
requirement of money. In growth option money is re invested and keep on growing
till the time you redeem it, whereas dividend is being paid out in dividend
Advantage of ELSS funds
portfolio in which the will be invested is transparently available to all the
the invested money completes 3 years of lock in period, you can with draw 100%
provides you flexibility to invest via SIP or lump sum mode.
returns regenerated by ELSS funds are comparatively better than in competitor
products. However the
comparison of ELSS and other products are depicted below.
is no maximum limit for investment in ELSS even once you tax limit is exhausted
, one can still invest in ELSS only thing is taxes can be saved up to Rs.
46,800/- under section 80 C of The
Income Tax Act,1961.
Disadvantages of ELSS Funds
- ELSS is
equity linked investment; there is no way one can avoid exposure towards equity
in so it’s not suitable for conservative investors.
- The money
which you received after 3 years of lock in period will be taxable as per Long
term capital gain tax.
returns are not guaranteed, any investment in mutual fund doesn’t guarantee
Top ELSS Tax Saving Funds for FY 2019-20
Note: Returns data is based on NAV (Net Asset Value) of direct-growth variant of the schemes as recorded on Nov 21, 2019.
AUM: Asset under Management. AUM data is as on Nov 21, 2019.
COMPARISON OF TAX SAVING INVESTMENT OPTIONS
*5-year weighted average return (with 50% in
equity and 25% each in corporate bonds and
government bonds) of NPS Tier-1 schemes. Returns not guaranteed.