" ELSS is the Best Tax Savings Scheme"

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ELSS: Equity Linked Savings Scheme

  • This type of investment is basically a mutual fund in the category of 'Equity: Tax Planning'.
  • Money in this type of Mutual Fund is invested in equity / stock market.
  • Money is generally invested in reputed companies.
  • The risk factor is average in this type of Mutual Fund. 
  • Return on investment may be better than any other Tax-Plan available in market.
  • Investment is locked for three years.
  • Investment amount is eligible for deduction under section 80C of income tax with upper limit of 1.5 lakh.
  • This plan is the best plan for Tax Planning as well as wealth creation in India.
  • Profit gained after three years of investment is termed as' Long Term Capital Gain'.
  • This long term capital gain is exempted from paying income tax upto gain of 1 lakh.

Now, there are numbers of Mutual fund schemes from different mutual fund houses. We will discuss few good funds as examples of 'Equity: Tax Planning' category.

  • Birla Sun Life Tax Relief 96 Fund:                                                        Invests in companies like Sundaram-Clayton, Honeywell Automation, Gillette, Bayer Cropscience, Johnson Controls – Hitachi, ICRA, Thomas Cook, Kotak Mahindra Bank, Pfizer and Glaxosmithcline Pharma. Yearly return of this fund is roughly 19 % as on date.

  • Axis Long Term Equity Fund:                                                       Invests in companies like HDFC  Bank, HDFC, Kotak Mahindra Bank, Maruti Suzuki, Bajaj Finance, L & T, Pidilite Industries, Motherson Sumi, Bosch and Cummins India. Yearly return of this fund is roughly 16 % as on date.


  • Tata India Tax Savings Fund:                                                       Invests in companies like HDFC  Bank, ICICI Bank, Yes Bank, Tata Motors, Future Retail, Avenue Supermarts, HCL Technologies, Tata Steel, ITC and Future Consumer enterprise. Yearly return of this fund is roughly 20 % as on date.                     


The examples are given above for your easy understanding. There are other good funds available in this category, which may be found easily in the internet.

Happy Investing !!!
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Comments

  1. Avijit24 August 2017 at 10:29

    I know you are not tax expert but for curiosity i want to know "long term capital gain" hence tax exemption here if we invest 50000 then how much we get tax benefit.Let X income 3.5 lakh per year so X's taxable income is 3.5-2.5=1 lakh So if X invest 50000 then taxable income 50000 and if X invest 100000 then taxable income 0.Is it the tax calculation way?

    ReplyDelete
  2. PRADIP25 August 2017 at 04:31

    Dear Avijit,
    You can ask anything about income tax. I used to give free tution to many so called tax expert during filing of income-tax-return every year. Note that..
    1) 'Long term capital gain' has nothing to do with tax deduction as it is basically a profit or gain when you sell a mutual fund.
    2) The amount of money that you invest in ELSS scheme only, is eligible for tax deduction under section 80C of income tax with maximum limit of 1.5 Lac.
    3) Example of Tax calculation for fin. year 2017-2018:
    Gross income: 4.0 lac
    Tax deduction: 50000
    Total income= 400000-50000=350000
    So, calculated tax = (350000-250000) × 5% + 3% cess
    =5000+150=5150;
    Note that 5% tax for income between 2.5 - 3 lac, no tax for income upto 3 lakh due to RS.2500/- rebate.
    Hope you understand the calculation.

    ReplyDelete
    Replies
    1. PRADIP25 August 2017 at 04:34

      Typing correction in 2nd last line: 2.5-5 lac

      Delete
  3. Avijit28 August 2017 at 02:29

    Excellent, So if my income 3 lakh per year and if i invest 50000 in ELSS scheme then my tax will be 0 due to rebate but if i invest in FD or post office saving scheme,will i get this benefit(tax deduction)?

    ReplyDelete
  4. PRADIP4 March 2018 at 20:02

    Dear readers,
    Please note that Govt of India has introduced LTCG tax of 10% on Capital Gain over Rs.1 Lakh in the Budget-2018.

    ReplyDelete
  5. Phani Kumar25 June 2020 at 04:44

    Hey, thanks for the information. your posts are informative and useful. I am regularly following your posts.

    Aavas Financiers,
    Eicher Motors,
    Tata Steel,
    Bajaj Finance,
    Siemens, ACC,
    State Bank of India,

    ReplyDelete
  6. Dariya28 June 2020 at 04:50

    Nice article thanks for sharing such a valuable information with us.you may also check our blog for more information NFO

    ReplyDelete

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