As a professional you must be worried about the financial year ending .Every one start looking for tax saving options. Traditional tax saving products are Insurance, PPF, NPS another option available is Mutual Fund.These are not just investment instrument but serves the purpose of tax saving also.
There are many schemes available such mutual funds are known as Equity Linked Saving Schemes(ELSS).These schemes are just like any other Mutual fund scheme where money is parked in various instrument equities, Debt or Money Market. ELSS invest in equity market thus promising good returns along with tax savings however it come with risk associated with equity market. It is also important to mention that in long term equities generates good returns. The tax benefit is available under section 80 C.
Key features for ELSS:
- Lock in period: There is a lock in period of 3 years. which is the minimum of any tax saving plans & this is the most attractive features of the plan.
- Types of ELSS: Dividend and growth scheme are the two options. In the first scheme if dividend announced in the scheme that will be the added bonus can be withdrawn or reinvested in the scheme and it will not affect the tax benefit & it can be announced many times during three years, in the second scheme you can withdraw your money from the scheme
- In the past it has generated return of 35% approximately, if continued even after 3 years of lock in period.
- Most of the ELSS are open ended schemes.
- Long term capital gains are not taxed.
- Minimum Investment starts with Rs 500 and there is no upper limit for the same .The investment can be done through Systematic Investment Plan(SIP) thus no need to make one time payment.
Best MF available:
- Aditya Birla Sunlife Tax Relief-96
- Axis Long Term Equity Fund
- DSP Black Rock Tax Saver Fund
- IDFC Tax Advantage Fund
- L&T Tax Advantage Fund