Best avenue to save tax u/s 80C

Why tax-saving funds are the best for you:

ELSS funds are one of the best avenues to save tax under Section 80C

ELSS Funds – what are they, how you save taxes, and why invest in them?

• Superior returns compared to other tax-saving products
  (refer table above)
• Lowest lock-in period of three years
• Long-term capital gains are tax-free

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.

BEYOND TAX SAVING

Parameter	PPF	NSC	ELSS
Tenure	15 years	6 years	3 years
Returns	(Compounded Annually) 8.80 % ^	(Compounded half-yearly) 8.60 to 8.90 % ^	Equity investments : dividends/ returns should not be assured
Minimum investments	Rs.500	Rs.100	Rs.500
Maximum investments	Rs.100,000	No limit*	No limit*
Amount eligible for deduction under Section 80C	Rs.1,50,000	Rs 1,50,000	Rs 1,50,000
Taxation for interest	Tax free	Taxable	Dividends and capital gain tax free
Safety/ Rating	Highest	Highest	High Risk  (Equity Investments)

* There is no upper limit on investments. However, investments of only upto

Rs.1,50,000 per year are allowed to be claimed as deductions under

Section 80C of IT Act.

SHORT Lock-in

Instrument	Lock-in Period
ELSS	3 Years from the date of allotment of the respective Units
Bank Fixed Deposit	5 Years
PO Time Deposit	5 Years
NSC	6 years
PPF	15 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

Reliance Tax Saver (ELSS) Fund (G)

http://www.moneycontrol.com/mutual-funds/nav/reliance-tax-saver-elss-fund/MRC101

Top of Form

PLAN: Regular OPTIONS: Growth

Bottom of Form

NAV as on 31 Dec, 2014 : 46.726

Very Good performance in the category

The scheme is ranked 1 in ELSS category by Crisil (for quarter ended Mar 2014) rank unchanged from last quarter. If you are already invested in this scheme, you may continue to stay invested.

Absolute Returns: 80.70 %

during the period of 01-01-2014 to 01-12-2014

(Absolute Returns : The return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or a mutual fund - achieves over a given period of time.)