What is Equity Linked Savings Scheme

 

For salaried taxpayers, the tax exemption provided under section 80C of the Income Tax Act is something that needs to be looked at every year. Tax savings under section 80C of Indian Income Tax Act has given the government an opportunity to encourage taxpayers towards savings, under which tax savings can be made by investing up to 1.5 lakhs in some schemes every financial year. These schemes are PF, PPF, life insurance premiums, investment in five-year bank FDs, expenses on children's education (up to two children), payment of principal of home loans, ELSS and NPS (National Pension Scheme).

 

What is ELSS?

 

ELSS, like Equity Linked Savings Scheme invests 80% of the deposits in the stock market and the rest in debt funds. ELSS has a minimum lock-in period of three years, while it is the only fund with the highest allocation of equity. However, unlike PF, PPF or bank FD, ELSS has no guaranteed return. But due to its low lock-in period and market-linked returns, its returns are higher than FD, PPF, even PF. Most savings schemes do not have diversity. For example, whether you open a PPF account in a bank or in a post office, it is the same, whether you work in TCS or Punjab National Bank, PF returns are equal. But more than 40 mutual fund companies offer you ELSS. As such, you have the option to choose an ELSS plan that will give you better returns in the long term. If you want to take a little risk, ELSS can become your first investment in the equity market.

 

Some good tax-saving ELSS are available, some of which are;

 

Top 10 Tax Saver Fund

 

1. Aditya Birla Mutual Fund ELSS 96 direct,

2. Franklin Tax Saver,

3. HDFC Tax Saving Scheme,

4. SBI Tax Saver,

5. ICICI Prudential Long Term,

6. DSP Blackrock Tax Saver Fund,

7. Kotak Tax Saving Fund,

8. Axis Long Term Equity ELSS,

9. Canara Robeco Tax Saver,

10.Tata Tax Saving Fund.