Quick Take: ELSS Funds - A boon for tax savers

As the financial year-end nears, a lot of people look to save paying taxes and invest in various financial products investment in which gives tax rebates. The most used section for claiming deductions is the 80C section under which an exemption of Rs. 1,50,000 is allowed. For a person in the highest tax bracket (30%) this contributes to directly saving more than Rs. 45,000 in taxes which otherwise would have to be paid.

Section 80C permits investment in a wide range of investment products like Tax Saver FD, PPF, Insurance Policies, House Loan EMIs (Principal portion) and Mutual Funds (ELSS). All the options are popular. In this short post, we would like to throw some light on ELSS funds.

Equity Linked Savings Scheme or ELSS is a type of mutual fund by investing in which the investor gets the benefit of 80C. Investors can invest any amount in ELSS funds but exemption only up to Rs. 1.5 lakhs can be taken. ELSS funds come with a lock-in period of 3 years which is the lowest lock-in as compared to any other instrument. As the name suggests the money is invested in equities and the investors get the benefit of investing in markets.

ELSS funds have given superior returns as compared to other traditional options if we go by historical trends. Considering an example of an investment of Rs. 1.5 lakh per year in PPF from March 1993 till December 2019 (total investment Rs. 40.5 lakh) would have amounted to Rs. 1.55 crore. However, if the same amount was invested in SBI Magnum Tax Gain Scheme (An ELSS Fund), the value would have been Rs. 6.41 crore.

ELSS funds offer the huge potential of returns, are easy to invest, have a minimum lock-in period. On the other hand ELSS investment is meant for investors who are willing to take an aggressive call on their investments as returns are volatile and not guaranteed.

Are you still left with your tax planning for the current year? If yes, then call us right away on +91-8568953926 and know more about tax saving investment solutions!

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