Spend, Save and Invest Smartly
ELSS refers to Equity Linked Savings Scheme. ELSS as the name clearly suggests is a savings scheme linked to equity markets. It is a type of mutual fund, which additionally offers tax benefits to the investors.
Equity linked saving schemes is a kind of mutual funds like diversified equity funds with Tax benefits. It is just like other tax saving instruments like National Savings Certificate and Public Provident Fund. Main advantage with ELSS is lock-in period is only 3 years while for NSC it is 6 years and for PPF it is 15 years. At the same time risk factor is high in ELSS.
As per Income Tax act 80c investment up to Rs 1, 20, 000 is eligible for deduction from the gross total income hence reducing the total taxable income. For example if your total annual income is Rs 6,00,000 and you invest Rs 1,20,000 in ELSS then your taxable income will become Rs 4,80,000, so that you can reduce the tax liability from 20% to 10%. Instead of paying 54000 you just have to pay 32000, here you are saving Rs.22000.
Previously there was an upper limit for investing in tax saving instruments like ELSS of 5,00,000. Only individuals with less than 5, 00,000 annual incomes are allowed to invest in tax saving instruments. But last now any individual can invest in ELSS irrespective of their income level.
ELSS VS PPF
Public Provident Fund (PPF) is a statutory scheme of the Central Government of India. Deposits in PPF qualify for rebate under section 80-C of Income Tax Act. The interest on deposits is totally tax free.
|Lock in period||15yrs||3yrs|
|Tax Benefit u/s 80c (per yr)||Rs 70000||Rs 120000|
|Interest receipt||On maturity||Depends on performance|
ELSS VS NSC
National Savings Certificates (NSC) is a certificate issued by Department of post, Government of India and is available at all post office counters in the country. It is a long term safe savings option for the investor. The scheme combines growth in money with reductions in tax liability as per the provisions of the Income Tax Act, 1961.
|Lock in period||6yrs||3yrs|
|Min. investment||Rs 100||Rs 500|
|Tax Benefit u/s 80c (per yr)||Rs 120000||Rs 120000|
ELSS VS ULIP
ULIP or Unit Linked Insurance Plan is primarily an insurance product as is evident from its name itself. It offers you the option to invest your money in debt,equity or mixture of debt and equity funds.
|Lock in period||3yrs||3yrs|
|Tax benefits||Rs 120000||Rs 120000|
FD VS ELSS
Tax-saving fixed deposits are conventional fixed deposits offered by banks.
|Lock in period||5yrs||3yrs|
|Interest/ Dividend Receipts||On Maturity||Depends on performance|
|Minimum Investment||Rs 100||Rs 500|
|Offered by||Banks||Mutual fund companies|
|Returns||7%-9% p.a||15%- 30%|