Skip to main content

Tax saving along with equity linked saving schemes (ELSS)

During this time of the year, taxpayers find themselves flooded with mails and SMSes goading them to invest in Section 80C instruments. Both insurance companies and mutual funds pitch their life/medical policies or equity linked saving schemes (ELSS).

Investing in ELSS, however, might soon be passé. If the Direct Taxes Code is implemented next year in its present form, this year would be the penultimate year in which you will get benefits from investing in ELSS under Section 80C.

A mutual fund scheme has to invest at least 65 per cent of its corpus in equities to get benefits under Section 80C. ELSS comes with a mandatory lockin of three years.

But, this period is much lesser than that of other instruments such as the Public Provident Fund of 15 years (six years for partial withdrawal), National Savings Certificate (six years) and unit-linked insurance plans (Ulips) of five years. Over a three year period, ELSS returned 1.30 per cent as against equity diversified funds' 1.27 per cent.

Besides the benefit in the first year, returns from these schemes have been quite good. According to mutual fund tracking agency Value Research, the ELSS category has returned 13.07 per cent annually, as compared to equity diversified funds' 12.48 per cent, as on January 25 this year.

Financial experts feel the main advantage of investing in ELSS is that it ensures forced investment in equities. ELSS gives the dual benefit of tax saving and equity investment. However, the allocation to ELSS should be decided only after calculating the amount spent for purchasing a term insurance and contribution made towards the Employee Provident Fund. It is because if one has already exhausted the limit by investing in these instruments, an equity-diversified fund can be a better option because of its liquidity — one can enter or exit the scheme when one wants.

Like any equity scheme, ELSS offers both dividend and growth options. The growth option gives better returns as the interest income gets reinvested and compounded. Those in need of cash or pensioners should opt for the regular payouts or dividend option.

The interest income is tax free because you hold the units for over a year. But you have to pay the securities transaction tax of 0.25 per cent at the time of maturity.

It is advised to invest a lump sum in ELSS. A systematic investment plan (SIP) works only if the tax benefits are to continue in the next financial year. Also, if you are already late, starting an SIP will not make much sense. Opt for an SIP in ELSS from the start of the financial year, if you want to have a disciplined approach.

However, the lock-in period can be a deterrent, according to many financial planners. Equities can be volatile. And, if the fund value erodes over three years, you cannot do anything. A three year period may not be sufficient for your equity investments to appreciate significantly either.

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

Perpetual SIP - Its Advantages

Retail investors have taken a fancy to investing in mutual funds through systematic investment plans (SIPs). As per industry estimates, Rs 4,000 crore flows into SIPs every month. One way to take advantage of SIPs in a true long-term manner is to opt for a perpetual SIP 1. What is a perpetual SIP? In an SIP , you make periodic investments in a mutual fund scheme of your choice generally every month for a pre defined tenure. While signing up an SIP mandate , you have the option to leave the end-date column blank. If the column is blank, it means the investor has opted for a perpetual SIP . Most fund houses assume this SIP will continue till December 2099 unless you give a written communication to stop it. However, some fund houses require you to tick the `perpetual option'. 2. What are the advantages of perpetual SIPs? Registering an SIP involves a lot of paperwork and it takes time. It is observed that many investors skip their SIP instalments when they go for short-tenure option...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now