We try to save money in various activities in our daily routine. There are various instances where we save money and look out for deals on flights, shopping discounts, food, movie tickets etc. Par as investors do we follow the same while investing. Do we take advantage of tax planning options.

Tax Bachaya Kya?

By investing in ELSS (Equity Linked Savings Schemes) you can now save tax and aim to create wealth through equities. Section 80C of Income Tax Act 1961 allows tax payers to reduce their income tax obligations by investing in specified eligible investments like ELSS. The amount you invest can be claimed as deduction from their taxable income for the purpose of income tax computation when filing your returns. Your 80C investments should also not be made only for the purpose of tax savings, but it should also be linked to your financial goals.

Advantage of ELSS

Equity Linked Savings Schemes (tax saver mutual funds) are also among the most tax friendly investment schemes among the eligible Section 80C investment options. There is no taxation during the investment period, unlike many fixed income 80C investment options. Since ELSS are equity oriented schemes with a minimum investment period of three years, capital gains from Equity linked savings schemes upto Rs 1.25 lakhs in a year is tax exempt. Capital gains in excess of Rs 1.25 Lakhs in any financial year is taxed at 12.5%.

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Why ELSS = Save Tax + Aim for Wealth Creation

Save Tax

Help to save Tax up to 46,800 By investing Rs 1.5 lakhs under Section 80C of Income Tax Act 1961

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Aim for Wealth Creation

Aims to capture growth opportunities through Equities

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Low lock in period

Lowest lock in period of 3 years, amongst all Sec 80C investment options

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Use our ELSS calculator to find out how much you can save on tax.

What is your taxable income?

2 L
10 Cr

 

This is how much tax you pay

9,25,600.00

How much can you invest annually in an ELSS?

0
1.5 L

 

With ELSS funds, your tax reduced to

9,11,560.00

Your overall savings

14,040

Source: AdvisorKhoj.com

Tax Savings Comparison Calculator

Performance comparison of investing in Equity market vs traditional tax saving products i.e. Nifty 50 TRI vs PPF & Bank Fixed Deposit.

Returns with asset class

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ELSS Booklet

ELSS or Equity Linked Saving Scheme is an open ended equity mutual fund that offers the dual-advantage of potential wealth creation and tax saving.

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Why should Millennials look at ELSS?

Millennials are a very important demographic segment in India, constituting nearly half of our workforce.

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ELSS versus PPF

Public Provident Fund (PPF) is one of the popular traditional 80C tax savings options in India. There are several reasons for PPF’s popularity among tax payers.

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Why should salaried class look at ELSS?

There are several provisions in the Income Tax Act wherein salaried individuals can save taxes, but Section 80C of the Income Tax 1961 Act provides the biggest tax saving opportunity.

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FAQ's

ELSS or Equity Linked Saving Scheme is an open ended equity mutual fund that offers the dual-advantage of potential wealth creation and tax saving. These funds have a statutory lock-in period of 3 years and invest primarily in equity and equity related products.

You can annually save up to Rs 46,800 in tax by investing in ELSS. Assuming you fall in the highest tax bracket and invest Rs 1.5 lakhs.

As the name suggests, funds invested in an ELSS fund will be invested in the equity market and hence based on historical performance, a higher probability of outperforming other tax saving options.

Long Term Capital gains upto Rs 1.25 lakhs in any equity oriented schemes in a financial year is exempt from tax. Capital gains in excess of Rs 1.25 Lakhs in any financial year is taxed at 12.5%.

No. Since ELSS is an equity scheme it is subject to market risk and does not guarantee return.

It is advised to have a long time horizon (3+ year) while investing in this fund.

No, since there is a statutory lock in period of 3 years; early withdrawal is not possible.

This is totally on you . You can either invest Rs 1.5 lakhs lumpsum or Rs12,500 on a monthly SIP basis. Minimum investment amount via SIP OR lumpsum is Rs 500.

One big benefit over a lumpsum investment is that SIP enables you to lower the average cost of your investment and reduce the risk of your investment. This is known as rupee-cost averaging.

Yes, by having a long term horizon one can aim to create a corpus through ELSS funds due to the dual advantage of potential capital appreciation and tax saving.

No, ELSS is not completely risk free like other tax saving options such as Bank FD and PPF. Their risk profile is similar to any equity-oriented mutual fund scheme.

The materials are a part of Investor Education and Awareness initiative of Mirae Asset Mutual Fund.

For information on one-time KYC (Know Your Customer) process, Registered Mutual Funds and procedure to lodge a complaint in case of any grievance. Click here!

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*By Mirae Asset Knowledge Academy

#Tax benefits are subject to the provision of the Income Tax Act, 1961 and are subject to amendments, from time to time.

Tax savings of Rs. 46,800 is calculated assuming qualifying amount of deduction is Rs 1.50 lakh and investor falls in the top income tax slab of 30% and includes applicable cess. Investors are advised to consult his/her own Tax advisor in view of individual nature of tax benefits. Further, tax deduction(s) available u/s 80Cof the Income Tax Act, 1961 is subject to condition specified therein. Investors are requested to note that fiscal laws may change from time to time and there can be no guarantee that the current tax position may continue in the future.

All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, click here

Disclaimer: The calculators are based on assumed rate of returns and meant for illustration purposes only. The calculators are designed to assist you to get a better understanding on how returns would have panned out in various scenarios. This calculator alone is not sufficient and shouldn’t be used for the development or implementation of any investment strategy. In the preparation of the calculator, Mirae Asset Mutual Fund (MAMF) has tied up with Advisorkhoj who have developed and integrated the calculator with our website. The calculator uses information that is publicly available and information developed in-house. Information gathered and material used in this calculator is believed to be from reliable sources. MAMF however does not warrant the accuracy, reasonableness and/or completeness of any such information. The examples do not purport to represent the performance of any security or investments. It is neither an investment advice nor should it be construed as indicative of any of the schemes of Mirae Asset Mutual Fund. Invest as per your risk appetite and time horizon. In view of individual nature of tax consequences, each investor is advised to consult his/ her own professional tax advisor before taking any investment decision. Contact your financial advisor for detailed insight into the investment advice. Mirae Asset Global Investments (India) Private Limited (the AMC) shall have no responsibility/liability whatsoever for the accuracy or any use or reliance thereof of such information. The AMC, its associate or sponsors or group companies, its Directors or employees accepts no liability for any loss or damage of any kind.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.