Non-taxable returns upto 17%
Lock-in period of only 03 years
Minimum investment amount of just Rs. 500/-
|Instruments under 80C||Lock in Period||Returns (p.a.)||Taxation Aspect^^|
|ELSS||3 years||Market-Linked||Dividend tax free in the hands of the investors#|
|PPF||15* years||8%||Interest is tax free|
|Tax Saving Fixed Deposit||5 years||6.85%^||Interest is taxable as per IT slab of individual|
|NSC||05/10 years||**8% (for 5yrs deposit)||Interest is taxable as per IT slab of individual|
|ULIP||5 years||Market-Linked||Maturity/claims proceed are tax free|
|EPF||Till Termination of Employment||8.55%||Interest is tax free|
Income Tax Benefit: Investments made in ELSS schemes are entitled for deduction from the taxable income under Section 80C of the Income Tax Act, 1961.
There is no limit for investments in ELSS plans, but investments of up to Rs. 1,50,000 qualify for income tax benefits.
3 Year Lock-in Period: Investments made in ELSS plans have a lock-in period of 3 years which inculcates a long-term investing discipline.
Not everyone is aware, but you can save tax under section 80C by investing in tax-saving instruments like EPF, PPF, FD, NSC, ULIP and ELSS. The investment limit is Rs.1.5 lakh and you can save upto Rs. 46,800.
A significant amount of your earning is usually eaten away by taxes. To ensure you keep more of what you make, tax planning becomes imperative. Which means, you need to invest your money in places that help you save taxes and even better – earn something out of them.
While there are many tax saving instruments available in the market, you have to be wise while selecting one. Just keeping your money in PPF or NSC to claim tax-break would yield moderate returns. If you want to make your money work harder and earn higher returns over long term, then mutual funds can be a good place to invest.
This is where Equity Linked Savings Schemes (ELSS) come into the picture. With a 3-year lock-in period, they have the potential to earn higher returns over long term than most tax-saving options and reduces your taxable income by Rs. 1,50,000.
Investing in small bits at regular intervals is smarter than devoting a huge chunk at a single go. That’s why Systematic Investment Plans (SIPs) can be a great entry point in a relatively unpredictable market. An SIP in ELSS can be started from as low as Rs. 500/-.
You can save up to Rs.1,50,000 on taxes by investing in tax-saving funds offered by various fund houses.
*Rs. 46,800 is the maximum tax amount that can be saved on an investment of Rs. 1,50,000 under Section 80C of the Income Tax Act, 1961 for tax payers in the 30% tax-slab. The amount varies according to the tax-slab of the tax payer.
~ Premature closure is not allowed before 15~ years. Partial withdrawal is permissible every year from 7th financial year from the year of opening account.
** Interest Compounded six monthly but payable at maturity
^ Interest rate of SBI 5 year deposit of less than a crore for non-senior citizen. Bank fixed deposit are relatively safer as they are covered under Deposit Insurance and Credit Guarantee Corporation of India to the extent of Rs. 1 lakh per account. Data as on November, 2018
^^ Taxation aspects shown above are as per the prevailing tax laws
Source: PPF, NSC data from India post, Tax Saving Fixed Deposit rate from SBI website
#As proposed by Finance Bill 2018, LTCG exceeding Rs. 1,00,000 on transfer of units of equity oriented mutual fund will be taxable at the rate of 10% (plus applicable surcharge and education cess). Also, DDT of 10% (plus applicable surcharge and would be charged on the Dividends paid out of such funds
Mutual fund Investments are subjected to market risks, read all scheme related documents carefully.