Tax planning may seem like a tedious exercise requiring lot of efforts that may make an ordinary investor nervous at the first glance. Equity Linked Savings Scheme (ELSS) offers a simple way to get tax benefits and at the same time get an opportunity to gain from the potential of Indian equity markets.
What is ELSS?
Simply put, ELSS is a type of diversified equity mutual fund which is qualified for tax exemption under section 80C of the Income Tax Act, and offers the twin-advantage of capital appreciation and tax benefits. It comes with a lock-in period of three years.
Why should one invest in an ELSS?
ELSS funds are one of the best avenues to save tax under Section 80C. This is because along with the tax deduction, the investor also gets the potential upside of investing in the equity markets. Also, no tax is levied on the long-term capital gains from these funds. Moreover, compared to other tax saving options, ELSS has the shortest lock-in period of three years.
BEYOND TAX SAVING
Bank Fixed deposits
5
Low
Prevailing 5 Year Rates
Tenure
15 years
6 years
3 years
Returns
(Compounded Annually)8.80 % ^
(Compounded half-yearly) 8.60 to 8.90 % ^
Not assured dividends/ returns
Minimum investments
Rs.500
Rs.100
Rs.500
Maximum investments
Rs.100,000
No limit*
No limit*
Amount eligible for deduction under Section 80C
Rs.100,000
Rs 1,00,000
Rs 1,00,000
Taxation for interest
Tax free
Taxable
Dividends and capital gain tax free
Safety/ Rating
Highest
Highest
High Risk
* There is no upper limit on investments. However, investments of only upto Rs.100,000 per year are allowed to be claimed as deductions under Section 80C of IT Act.
