Section 80C
gives the provision to save up to Rs.1,50,000 from taxes. There are a number of
investment options under section 80C like ELSS mutual funds, PPF, National
Savings Certificate (NSC), and Fixed Deposit of 5 years. Also, life insurance
premium is counted under Section 80C.
WHAT IS ELSS?
ELSS mutual funds
are a special kind of mutual fund which help you save taxes under Section 80C.
ELSS stands for equity linked saving schemes. These mutual funds primarily
invest in equities (stock market) and hence earn higher returns compared to
fixed deposit or PPF. The returns of these mutual funds are also tax free. This
basically means that you don’t need to pay any taxes on the returns that you
earned on these mutual
funds.
ELSS mutual
funds offer the highest returns compared to all other options. PPF gives you
somewhere around 7% – 8%, fixed deposit gives you around 6% - 7%, whereas ELSS
mutual funds have historically provided returns between 15% - 20%. ELSS mutual
funds also have the shortest lock-in period of only 3 years compared to a
lock-in of 15 years in PPF and 5 years in fixed deposit.
INVESTMENT IN ELSS THROUGH AN SIP
You can start
investing in ELSS with a small amount of only Rs.500 and you can invest as much
as you want. The sky is the limit. ELSS offered by mutual funds not only allow
tax deductions for investments up to Rs.1.5 lakhs under Section 80C but being
an equity fund, your money gets invested in all equity funds over the long
term; 8 to 10 years or more. They typically provide high returns. With SIP
(systematic investment plans), an investor can invest a
predetermined sum regularly in the mutual fund of their choice. So, does it
make any sense to invest in an ELSS through an SIP? Yes, it makes perfect sense
to invest in ELSS through SIP.
ELSS scores much
higher than many other tax saving investments since it gets to invest in
equities which have the potential to provide high returns in the long term. The
chances of these benefits accruing to you improve significantly when you invest
in an ELSS which has performed consistently over 1, 3, and 5 year periods.
Compared to ELSS, most of the tax saving investments have lower risk and can
provide only moderate returns.
SIP is an
effective way of investing in ELSS as it helps you benefit from the concept of
rupee cost averaging. You get more units when the fund’s NAV is lower and fewer
units when the fund’s NAV is higher. Over time, the average cost of buying a
unit averages out,and as the value of your investments increase, you make
substantial gains.
THE FINAL VERDICT
ELSS can be an
investment in each portfolio. It is a boon for salaried people looking to earn
some tax benefits under Section 80C. The tax saving element combined with a
lower lock-in period make it a great investment vehicle. Investors can truly
experience and benefit the power of compounding by investing in best ELSS
funds. The SIP option makes ELSS even more attractive to the average investor.
And most importantly, ELSS mutual funds
fall under the supervision of SEBI (Securities Exchange Board of India). As a
result, all companies are required to maintain complete transparency of
operations.
BEST ELSS FUNDS 2018
·Axis
long term equity fund
·Reliance
tax saver fund
·Mirae
asset tax saver fund
·MotilalOswal
focused long term fund.
