Wednesday, November 26, 2014



Tax planning may seem like a tedious exercise requiring lot of efforts that may make an ordinary investor nervous at the first glance. Equity Linked Savings Scheme (ELSS) offers a simple way to get tax benefits and at the same time get an opportunity to gain from the potential of Indian equity markets.
What is ELSS?
Simply put, ELSS is a type of diversified equity mutual fund which is qualified for tax exemption under section 80C of the Income Tax Act, and offers the twin-advantage of capital appreciation and tax benefits. It comes with a lock-in period of three years.
Why should one invest in an ELSS?
ELSS funds are one of the best avenues to save tax under Section 80C. This is because along with the tax deduction, the investor also gets the potential upside of investing in the equity markets. Also, no tax is levied on the long-term capital gains from these funds. Moreover, compared to other tax saving options, ELSS has the shortest lock-in period of three years.
Tenure15 years6 years3 years
Returns(Compounded Annually)
8.80 % ^
8.60 to 8.90 % ^
Not assured dividends/ returns
Minimum investmentsRs.500Rs.100Rs.500
Maximum investmentsRs.1,50,000No limit*No limit*
Amount eligible for
deduction under Section 80C
Rs.1,50,000Rs 1,50,000Rs 1,50,000
Taxation for interest Tax free TaxableDividends and capital gain tax free
 Safety/ Rating Highest Highest High Risk
* There is no upper limit on investments. However, investments of only upto Rs.100,000 per year are allowed to be claimed as deductions under Section 80C of IT Act.
^Source:, Rates incorporates compounding wherever applicable.
Disclaimer: The comparison of ELSS Vs other tax savings instrument has been given for the purpose of the general information only. Investment in ELSS carry high risk and any investment decision needs to be taken only after consulting the Tax Consultant or Financial Advisor. SBI Mutual Fund will not accept any liability/ responsibility/loss incurred on any investment decision taken on the basis of this information.


SHORT Lock-in
InstrumentLock-in Period
ELSS3 Years from the date of allotment of the respective Units
Bank Fixed Deposit5 Years
PO Time Deposit5 Years
NSC6 years
PPF15 Years (Partial withdrawal after 6 years)
Source: Banks and Post Office

Pros and Cons
Like all investment options; ELSS too come with its share of advantages and disadvantages.
Advantages of ELSS over NSC and PPF
  • Main advantage of ELSS is its short lock-in period. Maturity period of NSC is 6 years and PPF is 15 years.
  • Since it is an equity linked scheme earning potential is high.
  • Investor can opt for dividend option and get some gains during the lock-in period
  • Investor can opt for Systematic Investment Plan
Disadvantages of ELSS
  • Risk factor is very high compared to NSC and PPF
ParticularsWithout ELSS/ 80C Tax Saving InvestmentWith ELSS / 80C Tax Saving
Gross Total IncomeRs.7,50,000Rs.7,50,000
Exemption Under Section 80CNilRs.1,50,000
Total IncomeRs.7,50,000Rs.6,00,000
Tax on Total IncomeRs.75,000Rs.45,000
Tax saved on InvestmentNilRs.30,000
Illustration of Tax exemption for a male person less than 60 years in receipt of salary income for the assessment year 2014-15 (FY 2013-2014)
It is suitable for all types of investors who are not risk averse and need to invest in tax planning instruments. Though there is no age to get started on an ELSS, it is good investment to have for those who are just starting their careers as it can help them shed their inhibition about investing in equities through mutual funds in a big way.
How to start an ELSS account?
There are two ways to invest in ELSS.
  • Invest a fixed amount every month through systematic investment plan (SIP) in ELSS and reduce the burden of large investment towards the end of financial year.
  • Invest lump sum at any point of time.
Why SIP route for ELSS?
One of the best ways to invest is to save and invest on a regular basis through SIPs. SIP is a planned investment programme, whereby an investor invests small amounts of his/her savings in mutual funds at regular intervals.
Moreover, SIP helps an investor take advantage of the fluctuations in the stock markets by rupee cost averaging (in a rising equity market an investor gets fewer MF units but when the market is sliding he/she gets more MF units) and also helps him/ her reap the benefits of compounding. A SIP in ELSS offers an investor the best combination of investments—tax-savings and capital appreciation available to investors. The minimum investment in an ELSS through the SIP route can be as small as Rs 500.

Five good funds you can consider for tax saving :

For the convenience of the investors We analised the funds and decide
One can go for :

Reliance Tax Saver (ELSS) (G)
SBI Tax Advantage Sr-1 (G)
HDFC Tax Saver (G)
ICICI Pru Tax Plan (G)
Birla SL Tax Relief 96 (G)

Here are some presentation attached for your easy decesion.


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