Just one more day to go to be able to save on that tax bill. If you’re one of those who have successfully waited till the last minute, here’s making your life simpler.
What deductions are available?
There are several options available that can help reduce the taxable amount by Rs. 1.5 lakh. However, since only a day is left, and time is of the essence, ELSS can be a quick fix.
Instrument | Benefits under section | Total tax deduction |
Life Insurance | Section 80C (Premium) & Section 10(D) (Death/Maturity) | Up to Rs. 1,50,000 |
Health Insurance | Section 80D | Up to Rs. 55,000 |
ULIPs | 80CCC | Up to Rs. 1,50,000 |
New Pension Scheme (NPS) | Section 80CCE/ section 80CCD (1B) | Up to Rs. 1,50,000 Additional Rs. 50,000 |
Equity Linked Tax Saving Scheme (ELSS) | Section 80C | Up to Rs. 1,50,000 |
Public Provident Fund (PPF) | Section 80C | Up to Rs. 1,50,000 |
National Savings Certificate (NSC) | Section 80C | Up to Rs. 1,50,000 |
Infrastructure Bonds | Section 80CCF | Up to Rs. 1,50,000 |
Sukanya Samridhi Yojana | Section 80C | Up to Rs. 1,50,000 |
Fixed Deposit | Section 80C | Up to Rs. 1,50,000 |
Benefits of an ELSS investment
Well, ELSS is great not just from an ease perspective. There are significant return and lock-in advantages too, relative to other options. Here’s a list:
Investment | Returns | Lock-in Period |
ELSS | 15% based on the past 5 years - can vary in different time periods | 3 years |
New Pension Scheme (NPS) | 9-12% | Till retirement |
ULIPs | Returns vary from plan to plan | 5 years |
Public Provident Fund (PPF) | 7.1% | 15 years |
Sukanya Samriddhi Yojana | 7.6% | 21 years |
National Savings Certificate (NSC) | 6.8% | 5 years |
Bank FDs | 5.5-7.55% | 5 years |
What is ELSS?
Equity Linked Savings Scheme or ELSS Funds are open-ended Equity Mutual Funds that help you save and provide an opportunity to grow money.
Every year, up to Rs. 1.5 lakh invested in ELSS will reduce your taxable income as it is counted as a deduction.
However, ELSS investments will be subject to capital gains tax, whenever liquidated. So a 10% tax will be applicable to gains of above Rs. 1 lakh in aggregate in any year.
Features of ELSS
1. Asset Allocation
80% of the total corpus under ELSS shall be invested in equity shares as per the Securities Exchange Board of India (SEBI) guidelines.
2. Risk-Reward Ratio
The risk ratio associated with ELSS funds is extremely high as the primary investments are made in stocks. Along with high risk, higher returns are also generated compared to other investment options such as FDs or debt funds.
Which ELSS funds to invest in?
A few recommendations from us, based on past returns, risk-reward, managers, composition of funds, etc.
Name | 1 year returns | 3 year CAGR | CAGR since inception |
HDFC Long Term Advantage Fund (G) | 35.5% | 20.6% | 21.4% |
Canara Robeco Equity Taxsaver fund (G) | 18.1% | 20.0% | 20.2% |
Mirae Asset Tax Saver Fund (G) | 18.6% | 19.9% | 19.3% |
Axis Long Term Equity Fund (G) | 11.1% | 16.4% | 17.0% |
DSP Tax Saver Fund (G) | 21.8% | 18.3% | 14.6% |
A word of caution
SEBI’s rules mean that units would be allotted only when the money hits the fund house’s account. Effectively, making investments on the last date of the financial year could be detrimental. If the money hits the AMCs account late, and allotment happens late, you will end up getting the deduction for next year instead.
Since, we’re on the last day already,
If you transfer money using net banking or UPI before 12:45 PM, then the funds will be allotted to you on the same day. But if you transfer after 12:45 PM, it is the next day - which means money lost this year, but saved for next year.
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