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Section 80C Tax Saving option - ELSS can give investors best returns

 

 





With just three months to go for the financial year to end, you will be nearing the deadline to submit proof of your tax-saving investments under Section 80C of the Income Tax Act. Some good news here: The limit under Section 80C has been increased to Rs 1.5 lakh in the last Budget from Rs 1 lakh. That means, if you are in the 30% tax bracket, you actually get to save an additional Rs 15,000 on taxes.

However, what typically happens is that most investment decisions taken for this purpose are often done in haste. As a result, you may end up buying just one more insurance policy not knowing what it is and whether you need one in the first place. Or, you simply up your investments in the PPF account you have, not knowing that interest rates change every year.

Hence, first assess your investment options and then choose the one that suits you the best, and also makes for a smart investment product. Under Section 80C, the typical investment plans for saving on taxes include your Employee's Provident Fund (PF), Public Provident Fund (PPF), the NSC, the five-year tax-saving deposit and tax saving mutual funds. There are some insurance policies and plans too  

The best way to invest

If you are the kind who will invest and sit tight and not worry, then you could consider investing lump sum. Considering that you have just three months to finish this year, there may not be much time left.

However, in general, it makes sense to start investing from the start of the financial year, through SIPs. This way, you can average your costs in the equity market and also spread your investments, lest you do not have sufficient surplus to invest.

If you truly wish to average across market phases, continue SIPs for three-five years and claim tax concessions every year the way you would do with your insurance premium or other regular tax-saving options.

When you make ELSS a habit, you not only have a regular tax-saving option, you are automatically choosing a disciplined and smart investment option.


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