Thursday, February 21, 2013
Equity Link Savings Scheme u/s 80C
An ELSS is a diversified equity fund that invests In stocks and is not concentrated in a sector or market category, and is thus a less risky way to invest in equity market—with a three-year lock-
in. Within the tax-saving set, it is the only one that offers advantages of investing in equity.
ELSS is a mutual fund similar to any diversified equity mutual fund that routes your investments
into equity markets. ELSS carries a tax benefit on the amount invested with lock in of 3 Years.
Features of ELSS?
• Investing in equity in diversified way.
• Lock-in feature provides long-term investing discipline.
• Regular Tax free dividend payouts and tax free return.
• Provides tax saving benefits (up to 30.90%) and the potential for higher returns.
• Flexibility to invest small amounts through an SIP.
Who can buy?
What is the minimum & maximum amount of investment?
Investments can be made through a systematic investment plan (SIP) or lump sum. When markets are volatile, SIP is a better way to invest, save tax and create wealth over a long term.
Minimum Amount of investment is Rs.500. There is no limit for maximum amount of investment; however the tax advantage is only up to Rs. 1lakh.
How is Tax saved?
Investments in ELSS plans are eligible for deduction from gross taxable income under Section 80C of Income Tax Act up to 1 lakh. Individual inhighest tax bracket of 30.9% can save up to Rs.30, 900/- on an investment of Rs.1 lakh or more in ELSS.
Comparison with other options:
ELSS has a lower lock-in period compared to other tax saving options. PPF, a tax-saver option is a 15 year savings plan, while the National Saving Certificate carries a lock-in of 6 years.
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