Save Tax up-to Rs. 46,350 by Investing in ELSS

Written on Friday, February 12, 2016
By Team Bajaj Capital

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Equity Linked Saving Scheme (ELSS) is well-diversified equity funds regulated by SEBI. It is considered to be the best way to enter into the equity market. People who are looking to save tax and at the same time looking for higher returns than PPF, Tax saving Bank FD’s should opt for these schemes. PPF and Tax-saving Bank FD’s provides the return on investment between 8-9%, whereas being linked to the equity market, ELSS gives higher returns than any other investment schemes under the umbrella of Section 80C of Income Tax Act.


Benefits of ELSS

Apart from the many advantages in ELSS like the shortest lock-in period compared to other tax saving options i.e. only 3 years, it also provides Tax-free dividends and no tax on your long-term capital gains.


How to Choose?

People who are looking for equity exposed annual returns with tax saving can choose ‘’Dividend’’ options and People who are looking to build lump-sum corpus with equity exposure should go for ‘’Growth’’ option under ELSS schemes.


Who all should invest?

Any individual who is coming under the Tax slabs of 10%, 20% or 30% can opt for ELSS. Being linked to market and diversified ELSS is best suited for all.


An Opportunity for Young Earning Group

New joiners who are coming under Tax slabs can also invest in ELSS because they not only going to save tax but they can also build some corpus for their mid-term financial goals like buying a new car, buying a new phone or building some corpus for their marriage.


Must have for mid-age

People between the age 30 – 60 years can invest in ELSS in order to save tax and give equity exposure to their investment portfolio. 30 year and above age are the best age to think about long term Investments and equity exposure to their investment portfolio can give an edge to their investment portfolio along with tax-saving advantage come in a package with ELSS.


Best for the senior citizen

It’s time to come out from the popular misconception that ELSS or better say equities are not suitable for Senior Citizens/ Retirees. In fact, it’s just vise versa as ELSS will not only help you save tax, but it will provide liquidity after three years only. In Tax-saving Bank FD’s lock in period is five years and returns are also taxable and TDS is deducted yearly. So further deductions of TDS reduces the return on your investment in Tax-saving Bank FD’s by making less money available for long-term compounding.


How much to Invest?

One can invest in ELSS through Systematic Investment Planning (SIP) i.e. the amount as less as Rs. 1000 per month, which will be automatically deducted from your bank account. It helps you build discipline approach towards regular investments. You can also invest lump-sum, the minimum amount in the case of lump-sum is Rs. 5000, but one can claim deductions up to Rs. 1.5 lacs & save tax up to Rs. 46’350 depending on your tax slabs.


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