ELSS as Tax Saving Instrument Good or Bad ??

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Dear All

Well last quarter of our (Indian) FY..Most of us must be  worried about Tax Savings . In last budget govt has also increased 80C limit to 1,50,000.

ELSS

So If you are working employee, a piece of it will be covered by your EPF,Term Insurance (hope you have taken one) etc

Now my strong recommendation will be put your rest of money in to instrument called ELSS

Lets understand about ELSS now:

What is ELSS?

Equity Linked Savings Scheme is nothing but  a Diversified Equity Mutual Fund. It is a type of mutual fund that qualifies for tax exemption under section 80 c.

How its differ from other MF’s ?

Unlike others equity funds which require minimum investments of Rs. 5000, one can invest in ELSS with as low as Rs. 500 by means of SIP (Systematic Investment Plan). The returns from ELSS depend on the stock market and hence tend to be volatile, but then they are generally higher than the returns generated from traditional tax saver instruments.

How they invest?

An ELSS is an equity oriented mutual fund scheme in which the majority corpus (about 80-100%) is invested in equities. As the allocation is done in equity which are considered as high return assets, the primary aim of such funds is capital appreciation.

TAX on withdrawal?

Here is good news, No TAX on withdrawal if withdrawn after 3-Years lock-in.

So if you are under 30% Tax Slab, you immediate save 30% and get higher Tax free -returns after 3 years (depends upon market conditions)

So…If still you have not done your Tax savings for the year…..Don’t wait and go and buy ELSS as we all understand India’s next few years will be excellent (Big bang reforms are in-pipeline).

 

Regards

Finance_Doc

 

 

 

 

 

 

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