Section 80C – Investment in Equity Linked Savings Scheme (ELSS)

It is the time of year when most of people invest in various products to claim the deduction under Income Tax Act. Surprising that most of them choose either bank FD’s or PPF as their first priority for Tax saving although from so many years Equity Linked Savings Scheme (ELSS) has emerged as best product for tax saving investments in Indian market.

An Equity Linked Savings Scheme (ELSS) is an open-ended Equity Mutual Fund which gives following advantage-

• Opportunity to grow your money.
• Qualifies for tax exemptions under section u/s. 80C of the Indian Income Tax Act.
• Long-term capital gains from these funds are tax free in your hands.
• Shorter lock-in period of 3 years as compared to NSC & PPF
• Exposure to equity results in high earning potential
• Dividend payout option enables gains even during lock-in period
• Investing through Systematic Investment Plan (SIP) averages out your investments over a period of time

Even when markets were negative, ELSS has given fair returns with double tax exemption, not only you can claim the exemption u/s 80 C but also the gains will be exempt from tax. Lack of awareness and half knowledge is the most prominent reason for the same. Following is the list of Top performing ELSS.

Fund / Benchmarks	Return %	Rank	Return %	Rank
Reliance Tax Saver Fund	95.47	1	39.20	2
Axis Long Term Equity Fund	71.03	2	41.30	1
Birla Sun Life Tax Relief 96	62.61	3	31.82	3
Kotak Tax Saver	62.43	4	21.65	29
Franklin India Taxshield Fund	62.12	5	29.36	6
HDFC Taxsaver Fund	61.07	6	27.31	13
Birla Sun Life Tax Plan	60.77	7	30.74	4
BNP Paribas Long Term Equity Fund	58.06	8	28.40	7
Religare Invesco Tax Plan	57.49	9	30.28	5
DSP BlackRock Tax Saver Fund	57.19	10	28.18	9
HSBC Tax Saver Equity Fund	55.39	11	25.80	20

Now you can see the difference in return of FD and PPF and ELSS. According to most of the experts in the street ELSS is still the best option to make 80C investments as steep fall in the prices of crude will work as a boon for India. Indian markets will continue to perform robustly.

Points to remember while choosing an appropriate ELSS

You must always remember to do thorough research when you invest in an ELSS fund. You must look at the long term performance of the fund before putting your money in it. Also remember to look at the fund details like the fund manager’s investment approach, portfolio of the fund, the expense ratio of the fund and how volatile the fund has been in the past.

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

Article on www.taxguru.in

Submitted by Shaifaly Girdharwal