Equity Linked Savings Schemes (ELSS) are Mutual fund investment schemes that help you save income tax and are also known as tax-saving funds.
Under section 80C,of The Income Tax Act, it allows taxpayers to invest up to INR 1.5 lakh in specific securities and claim it as a deduction from their taxable income. One of the approved securities is ELSS– others include PPF, postal savings like NSC, tax-saving FDs, NPS, etc.
- ELSS funds invest a large percentage of their portfolio in equity.
- They have a compulsory lock-in period of 3 years, which is the shortest amongst all tax saving instruments.
- You enjoy the dual benefits of capital appreciation from investments in equity along with tax-saving
- You can opt for dividend pay-outs if you wish to receive regular income or go with the growth option for capital appreciation
- ELSS Mutual Funds do not have any entry or exit load.
- Good ELSS Funds generate returns in the range of 10-12 per cent in the long run, among the highest in the tax-saving category of instruments.
- However, ELSS also comes with some risk, inherent in equity investments
A comparison of ELSS with other tax saving instruments
|
Name of Instrument |
Lock In Period |
Returns |
| ELSS |
3 Years |
10 -12% |
|
Tax Saving FD |
5 Years |
6 – 7% |
| National Saving Certificate (NSC) |
5 Years |
7 – 8% |
| Public Provident Fund (PPF) |
15 Years |
7 – 8% |
| National Pension Scheme |
Upto Age of 60 |
8 – 10% |
So, here we see that ELSS are the best tax saving instruments. Invest in ELSS today and save taxes.