Why ELSS is best tax saving instrument under section 80C

Why ELSS is best tax saving instrument under section 80C

Section 80C is tax saving option where one can invest and claim tax exemption from income upto Rs 1.5lakhs from your total taxable income.This Section 80C is allowed to Individual or HUF.

 

Investment Options under section 80C. Here is a List

PPF-Public Provident Fund:

  • Rate of interest: 8.70%
  • Lock period: 5 years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

NSC-National Savings Certificate

  • Rate of interest: 8.50%
  • Lock period: 5 years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

Bank deposits:

  • Rate of interest: 8-9%
  • Lock period: 5 years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

 

SCSS-Senior Citizens Savings Scheme

  • Rate of interest: 9.30%
  • Lock period: 5 Years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

Life Insurance Premiums

  • Rate of interest: 5-7 %
  • Lock period: 3 Years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

ELSS-Equity linked Savings Schemes

  • Rate of interest: Market defined
  • Lock period: 3 years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

ULIP-Unit Linked Insurance Plan

  • Rate of interest: Market defined
  • Lock period: variable
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

Post time deposit (5 years)

  • Rate of interest: 8.50%
  • Lock period: 5 Years
  • Tax on returns:Nil for above 1 year
  • Safety:High
  • Tax exemption: Rs 1.5lakhs

Why ELSS is best tax saving instrument under section 80C:

 

As you can see from the above table,ELSS schemes used to offer higher returns but no guarantee, have shorter lock-ins and all elements including Principal and Capital Gains if any are tax free.

 

If you have not invested in ELSS schemes before, please consider them for tax saving this year. They have proved to be a smart way to save taxes as well as earn returns higher than inflation.

Investors can opt for dividend option and get regular income during lock period.

Investing ELSS funds through SIP monthly would help you to reduce lump sum investment burden and provide higher returns.