Sharing A Financial Tip:
Every investor wishes to have in his portfolio is an instrument that can help build wealth and save taxes at the same time. PPF, NSC, and tax-saving fixed deposits are some such options that ensure capital appreciation and allow tax exemption through Section 80C of the Income Tax Act. However, the one that has an edge over all these investment instruments is Equity Linked Saving Scheme (ELSS) mutual funds.
Every investor wishes to have in his portfolio is an instrument that can help build wealth and save taxes at the same time. PPF, NSC, and tax-saving fixed deposits are some such options that ensure capital appreciation and allow tax exemption through Section 80C of the Income Tax Act. However, the one that has an edge over all these investment instruments is Equity Linked Saving Scheme (ELSS) mutual funds.
Merits and demerits of ELSS funds:
• ELSS funds are diversified mutual funds with most of the corpus invested in equities.
• These funds typically attract higher returns when the stock market fares well, but also carry all the risks of investing in equity.
• The minimum amount that can be invested in ELSS is Rs 500; there is no cap on the maximum you can put in.
• These investments come with a three-year lock in period and can be withdrawn completely on completion of the stipulated time.
• Any investment towards this fund up to Rs 150,000 is eligible for tax deduction under Section 80C of the Income Tax Act.
• The returns received on maturity of the plan are not taxable as well; because no long term capital gains tax on equity investments,
• ELSS funds have both dividend and growth options. In the dividend option an investor is entitled to dividends even during the lock-in period. In case of growth funds, the investor gets a lump sum once the lock-in period is over.
Advantages of ELSS funds
1. Tax deduction can be claimed under Section 80C on any investment of up to Rs 1,50,000 made towards the scheme
2. According to the CRISIL-AMFI ELSS Fund Performance Index in December 2016, the ELSS funds have returned 3.35% last year, 16.64% in the three years and 17.71% in the last five and 10.61% in 10 years.
3. The three-year lock-in period is much lower than Public Provident Fund (PPF), National Savings Certificate and bank deposits.
4. The ELSS maturity amount is tax free
5. ELSS allows high capital appreciation in a short period of time..
6. The dividend funds fetch gains during the lock-in period and the dividends on equity investments are tax free.
7. ELSS encourages investors to stay invested over long time to see best results.
Investment in ELSS:
• Investment in ELSS can be done through one-time investments and SIP.
• The SIP route allows you to invest in amounts as small as Rs.500 each month.
• It also reduces the volatility resulting from market movements and makes tax planning more disciplined.
• ELSS funds are suitable for investors who have a relatively high risk appetite and are looking for ways to save a good deal of taxes in the long run.
**Source: Financial Express
• ELSS funds are diversified mutual funds with most of the corpus invested in equities.
• These funds typically attract higher returns when the stock market fares well, but also carry all the risks of investing in equity.
• The minimum amount that can be invested in ELSS is Rs 500; there is no cap on the maximum you can put in.
• These investments come with a three-year lock in period and can be withdrawn completely on completion of the stipulated time.
• Any investment towards this fund up to Rs 150,000 is eligible for tax deduction under Section 80C of the Income Tax Act.
• The returns received on maturity of the plan are not taxable as well; because no long term capital gains tax on equity investments,
• ELSS funds have both dividend and growth options. In the dividend option an investor is entitled to dividends even during the lock-in period. In case of growth funds, the investor gets a lump sum once the lock-in period is over.
Advantages of ELSS funds
1. Tax deduction can be claimed under Section 80C on any investment of up to Rs 1,50,000 made towards the scheme
2. According to the CRISIL-AMFI ELSS Fund Performance Index in December 2016, the ELSS funds have returned 3.35% last year, 16.64% in the three years and 17.71% in the last five and 10.61% in 10 years.
3. The three-year lock-in period is much lower than Public Provident Fund (PPF), National Savings Certificate and bank deposits.
4. The ELSS maturity amount is tax free
5. ELSS allows high capital appreciation in a short period of time..
6. The dividend funds fetch gains during the lock-in period and the dividends on equity investments are tax free.
7. ELSS encourages investors to stay invested over long time to see best results.
Investment in ELSS:
• Investment in ELSS can be done through one-time investments and SIP.
• The SIP route allows you to invest in amounts as small as Rs.500 each month.
• It also reduces the volatility resulting from market movements and makes tax planning more disciplined.
• ELSS funds are suitable for investors who have a relatively high risk appetite and are looking for ways to save a good deal of taxes in the long run.
**Source: Financial Express
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