tax saving investment
TRANSCRIPT
TAXSAVER HAS GROWN 93^ TIMES IN 18 YEARS
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“The hardest thing in the world to understand is the income tax.”
ELSS are mutual fund scheme & are quite similar to diversified equity funds of Mutual Fund.
As the name suggests, the scheme primarily invests in equity market by buying equity stocks of companies listed on the stock exchanges.
The units of the scheme are offered at the NAV (Net Asset Value).
The NAV is announced for all business days and keeps changing primarily depending upon the movement in the prices of stocks held in the portfolio of the scheme.
ELSS Mutual Fund
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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.
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.
Earn Money Save Tax
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Comparison of various tax saving instruments
Investment Avenue
% Return
Min Investment
Max Investment
Lock in Period
Feature
National SavingCertificate
8 Rs.100 No limit 6 years Interest is taxable
Public Provident Fund
8 Rs.500 Rs.70,000 15 years Tax Free Return
Time Deposit 6.25-7.5 Rs.200 No limit 5 years(to avail 80C benefit)
Interest is taxable
Senior CitizenSaving Scheme
9 Rs.1000 Rs.15 lakh 5 years(to avail 80C benefit)
Minimum age is 55 to avail this option
Equity Linked Saving Scheme
Market driven but one can expect 15-17% return
Rs.500 to Rs.5000
No limit 3 years Lowest Lock in period with maximum Possible Return
* Apart from these, insurance premium on life insurance policies and principal component of housing loan are also eligible for Section 80 C benefit.
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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.
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ELSS Investment Option
ELSS
Dividend OptionGrowth Option
Dividend Payout Dividend ReinvestedUnder the Growth option, the
investor will not get any income during the tenure of investment. At the time of redemption, the investor get lump-sum Amount
Under this plan, if the schemes declare a dividend, the investor will receive dividend income
Under this scheme, the dividend declared by the scheme is reinvested on behalf of the investor at the prevailing NAV on the day if dividend. Investor can claim additional tax benefits on reinvested dividend amount.
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In SIP, you invest a certain amount each month in a fund.
It’s an effective way of investing in ELSS as the concept of,
rupee cost averaging and the power of compounding
works well.
Even if you have done your tax planning for this year start this from 1st April 2011.
Systematic Investment Plan (SIP) in ELSS
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Benefits of ELSS MF
Tax benefit at the Investment
You can get tax benefit under section 80 C of Income tax. Maximum limit is Rs 100000.
Shortest duration
Lock in period of ELSS is 3 year which is shortest in comparison to any other tax saving investment. This lock in is the only difference between diversified equity mutual fund & ELSS.
Tax free return
Any profit/ capital gain you have from ELSS is completely tax free. If you see return from NSC & Tax saving Bank FDs they are completely taxable & added to your income. Only PPF Offers tax- free return but it has a maturity period of 15 years.
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Tax free dividends
ELSS schemes keeps giving dividend on regular intervals & the whole dividend you receive is tax free.
No entry Loads (Less Expensive)
Say if you invest Rs 10000 in ELSS Scheme your complete Rs 10000 is invested in Mutual Fund. You have to decide how much want to pay your advisor.
High Growth
Equity funds can be volatile in the short run, but have been known to beat inflation and create wealth over the long run.
If you are looking at investing some money that you won’t need future, and are willing to ride the ups and downs of the market, you may find ELSS an ideal tax saving option.
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Cont…
Type of deposit:
Two types of deposits are to be offered under the scheme, One providing for quarterly compounding/reinvestment of interest (RIC scheme)
Other providing for quarterly payout of Interest (QIC scheme) to the designated operative account of the depositor.
Two schemes:
TDGRI (Reinvestment Type)
TDGQI (Quarterly Interest Type).
Features
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Fixed Deposits with the bank shall be subject to Tax Deduction at source as per Income Tax Act 1961.
Interest on these term deposits shall be liable to tax under the Act, on the basis of annual accrual or receipt, depending upon the method of accounting followed by the assesses.
The tax on such interest shall be deducted in accordance with the provisions of section 194A or section 195 of the Act.
Tax Deducted at Source
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Via SIP mode rather than lump sum (for cost averaging) In GROWTH Option (for wealth accumulation)
In DIRECT Plan (to save costs & higher returns)
It is always better to invest
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Make sure your tax saving investments fulfill your needs and match your risk profile and investment horizon.
Our Tax Savings Solutions help to reduce your tax burden and at the same time, aim to grow your money through equity investments.
Section 80C of the Income Tax Act, 1961 provides options to save tax by reducing the taxable income by up to 1 lakh. But, wealth creation is also important.
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May invest your money in a better way
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