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Invest in Mutual Fund ELSS and save

tax up to Rs. 30,900/-


Mutual funds Equity linked Savings Scheme (ELSS) is one of the most popular tax
saving instruments forming part of Section 80C of Income Tax Act. So if you fall under
the highest tax slab of 30.9% (including education cess) then your investment of Rs.
1,00,000/- U/S 80C would give you tax saving of Rs. 30,900/- i.e. tax saving @30.9% on
Rs. 1,00,000/-. Lets understand ELSS in detail:
What is an ELSS?
It is an exclusive diversified mutual fund scheme with a lock in period of 3 years and
investment in it qualifies under section 80C. ELSS invests in share market and thus
offers dual advantage; first is capital appreciation due to potential of getting higher
returns from stock market and second is the tax benefit.

Advantages of ELSS:
Tax Saving: ELSS is the only dedicated mutual funds schemes which offer tax
savings. Your investments of up to Rs. One lakh would be deductible from your gross
total income u/s 80C and gives you tax savings based on your slab.
Tax free returns: ELSS returns are tax free because long term capital gain on sale
of mutual funds is tax free. This makes ELSS a better investment option than tax
saving FDs or NSCs where in the returns are not tax free.
Shortest lock-in period: 3 years lock in period of ELSS is the shortest lock in
period while compared to other tax saving options like PPF (15 years) and NSCs/Tax
savings FDs (5years).
Monthly investment (SIPs): One can even invest on a monthly basis via SIP
mode which is not available while investing in PPF, NSCs or FDs.
Higher Returns: Since ELSS invests in stock market, you can expect better &
higher returns as compared to fixed tax saving instruments like PPF/NSCs/FDs etc.
Past performance of few ELSS has generated a return of 15 to 25% on an average.

Disadvantages of ELSS:
Since these schemes invest in stock market, all the risk risks as associated with stock
market for e.g. market volatility are applicable to ELSS as well. ELSS returns unlike
PPF/FDs & NSCs are not guaranteed and could be more or less depending upon stock
market and you should stay away from these schemes if you do not wish to take any risk
at all.
Which are the best available ELSS & How to select it?
Some of the best available tax saving mutual funds schemes are Canara Robeco
Equity Tax Saver, HDFC Tax Saver & HDFC long term advantage Fund, Birla
Sun life Tax relief fun , DSP Black Rock Tax Saver Plan & ICICI Prudential
Tax Plan. You should always select an ELSS based on its track record of at least 3 to 5
years rather than short term performance. Also look at its dividend history if any and
invest in more than one ELSS scheme to diversify and reduce the risk of investing lump
sum in a single scheme