ELSS: Not Only Tax Saving But Also Better Option For Regular Investment And Top Return; Check Details

Tax Saver Mutual Funds

There are many schemes in the market, in which you are getting the benefit of exemption in income tax on investing. If there are small savings schemes, then Equity Linked Savings Scheme (ELSS) of mutual funds is also an option. Taxpayers take their own tax saving measures, under the provisions under section 80C of Income Tax. But there are many people who miss out on paying attention that choose such a scheme, where there is tax saving, but the return is also high. If you are looking for such an option then ELSS is a good option for you. There is usually a possibility that fixed income options will be more profitable. These schemes offer market-linked returns, but investing through mutual funds instead of direct equities lowers the risk.

Key Features of ELSS Mutual Funds:

• ELSS Mutual funds have a three-year lock-in period, and there are no provisions for early withdrawal.
• Income Tax deductions of up to Rs 1,50,000 per year under Section 80C.
• There is no maximum investment amount in ELSS, but the minimum investable amount varies between fund houses.
• ELSS funds are the only tax-advantaged investment that has the potential to outperform inflation.
• Investing in ELSS funds provides you with the dual benefits of tax breaks and wealth creation.
• An ELSS Mutual Fund’s portfolio is primarily comprised of equities, with some exposure to fixed-income securities.

High Return Funds in 3 Years and 5 Years

Invesco Ind Tax Plan: 17, 16%

BOI AXA Tax Advantage: 26%, 19.5%

IDFC Tax Advantage: 21%, 18%

Quant Tax Plan: 35%, 24%

Kotak Tax Saver: 19%, 15%

Mirae Asset Tax Saver: 22%, 19%

PGIM Ind ELSS Tax Saver: 20%, 16%

Axis Long Term Equity: 17%, 16%

Canara Robeco Eqt Tax Saver: 21%, 18%

DSP Tax Saver: 19%, 16%

JM Tax Gain Dir: 19%, 16%

Lock in period of 3 years

The best thing about ELSS is that in most of the schemes the lock-in period is only 3 years. Whereas in schemes like Tax Saver FD or National Savings Certificate, the lock-in period is 5 years. With lock-in period of 3 years and higher returns have made ELSS Very popular tax saving option. In 5 years Fixed Deposit or other savings scheme, annual interest is around 6 to 7.5 percent. On the other hand, if we look at the returns of ELSS, investors have got 15 to 20 percent returns in many schemes in 5 years.

The longer the investment, the higher the profit

The corporation says that there is usually a lock-in period in these schemes, but it is not necessary that after that you can redeem the unit.
Other benefits of investing in ELSS

Investors of ELSS can also opt for Systematic Investment Plan (SIP). At least 80 per cent of ELSS exposure is in equities. Because of this, the scope for higher returns increases. It also has the flexibility to invest in all market caps, which makes it a unique product among equity funds. The profit on investment in ELSS and the amount received from redemption is completely tax free. Long Term Capital Gains (LTCG) on returns up to Rs 1 lakh in 1 year through ELSS are exempted from income tax. However, profit above this limit is taxed at the rate of 10 percent.

ELSS Comparision With Other Tax-Saving Instruments

Currently, there are several tax-saving schemes available to help you accumulate wealth over time, including FD, PPF, and NSC, etc. However, the returns provided by these schemes are limited. This is where ELSS shines: its returns are generally higher, especially when markets are bullish. This, combined with a three-year lock-in period, makes ELSS mutual funds the best tax-saving investment option. Even after-tax returns on ELSS are far superior to those of any other tax-saving investment option. In 5 years Fixed Deposit or other savings scheme, annual interest is around 6 to 7.5 percent. On the other hand, if we look at the returns of ELSS, investors have got 15 to 20 percent returns in many schemes in 5 years.

ELSS: Not Only Tax Saving But Also Better Option For Regular Investment And Top Return; Check Details