We live in a consumer driven era, where we are spoilt for choices today and are always looking to cut the best deal when we are out to shop. Don’t you find yourself always looking for those ‘one plus one free’ offers while you shop? But, could you imagine this concept applying to your tax planning as well? That’s where Equity Linked Savings Schemes (ELSS) comes in. ELSS aims to give you a dual benefit of tax savings along with wealth building.
ELSS is a special category of mutual funds that invests predominantly in equity and equity related instruments. Investments in ELSS come with a 3-year lock in period.
When you invest in ELSS (up to INR 1,50,000 a year), you get a deduction from your taxable income u/s 80C of Income Tax Act, 1961. This can potentially give you a direct income tax benefit of INR 53,820* a year.
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How much can you invest annually in an ELSS?
The Aditya Birla Sun Life Tax Relief ’96 Fund can be the choice here for funding your medium to long term goals through wealth building while saving tax along the way.
It invests a majority (more than 80%) of its corpus in diversified equity and equity related
instruments. Return from investments in equity tends to outperform other investment modes
over the long term. This scheme managed by its expert fund managers offer market linked
returns thus giving you an opportunity for capital growth and wealth.
To know more about our product Click here
(An Open Ended Equity Linked Savings Scheme with a statutory lock in of 3 years and tax benefit.)
*We recommend investors to consult their financial advisers in case of doubt about whether the product is suitable for them.
|Investment Option||Equity Linked Saving Schemes (ELSS)||Public Provident Fund (PPF)||Issue of National Savings Certification (NSC VIII)||Bank Fixed deposit/Post Office Fixed deposit|
|Value of investment
(After 3 Years)
|Lock in period (in years)||3 Years||15 Years||5 Years||5 Years|
|Return potential||12.14% p.a. 1||7.9% p.a. 2||7.9% p.a. 2||7% to 8% p.a. 3|
|Possibility for Dividends||Yes, with dividend option||No||No||No|
|Tax on returns||Long term capital gains above INR 100,000 taxed ＠ 10%4||Tax free after 15 years||Taxable at applicable tax slab rate||Taxable at applicable tax slab rate|
|Investment strategy||Active, market linked returns||Passive, pre-determined returns||Passive, pre-determined returns||Passive, pre-determined returns|
1 ELSS Category Average, as on 22nd January,, 2020, source: Morningstar Direct.
2 PPF and NSC, source: India Post.
3Bank Fixed Deposit, source: Average FD rates of PSU Banks
4Applicable surcharge & cess extra
Note: Unlike PPF, NSC & FDs investments in Mutual Funds are subject to market risks.
Annual tax saving up to INR 53,820* u/s 80C Income Tax Act, 1961
The lock-in feature discourages you from making early redemptions & inculcates discipline in your investing
You can benefit from long term capital growth potential of equity category through market linked returns
You get access to the years of expertise of fund managers in stock selection and portfolio management
No extra charges/fees to be paid on redeeming investment after 3 years
Long-Term Capital Gains (LTCG) tax is applicable on ELSS funds as the lock-in period is 3 years. Gains are taxed at 10% for gains over 1 lakh rupees.
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