save-tax

Save Tax

What is ELSS?

ELSS (Equity-linked Savings Scheme) is a special kind of mutual fund that helps you to save taxes under sec 80C of income tax. In this scheme, the funds are invested in equity, and because of which the investor has the potential to earn high returns compared to Fixed Deposit and Public Provident Fund. And returns on these are tax-free. However, the returns are only taxable if the earnings are above 1 lakh.

How much tax can I save?

It depends on the tax bracket an individual belongs to:

  1. If you are in the 5% tax bracket, you can save up to Rs 15,000 per year in taxes.
  2. If you belong to the 20% tax bracket, then you can save up to Rs 30,000 per year in taxes.
  3. If you are in the highest tax bracket of 30%, you could save up to Rs 45,000 per year in tax.

Lock-in Period

ELSS funds have a lock-in period of three years, which is a short period when compared to other investment options. If you lock your funds for three years, you will get the tax benefit the year you have started to invest in ELSS funds.
An investor you can withdraw your ELSS funds after three years from the date of investment. Before that, your investment is subject to the lock-in period. It is not possible to withdraw your funds before three years of investment.

ELSS is the best tax saving option?

Yes, ELSS is the best tax saving option under 80C, and here are the three reasons:

1. Returns
ELSS funds give higher returns, as high as ~15% or more when compared with Fixed Deposit (6%-7%)and Public Provident Fund (8%), while most of the schemes under 80C offer returns between 6% and 8.3%

2. Lock-in period
Compared with other investment, ELSS funds have the lowest lock-in of just three years.

3. Flexibility
While options like Fixed Deposits require investments made in lumpsum and one-time, ELSS allows investors to invest via SIP as low as Rs. 100.

Comparison between ELSS and other tax-saving methods:

Many tax-saving schemes would help to build your wealth, such as PPF (Public Provident Fund) and NSC (National Saving Certificates). However, the fact is that these schemes are taxed. This is where ELSS stands out with its dual benefit i.e., its returns are generally higher and partially taxable, that too returns are only taxable if the gain is above 1 lakh. Let’s look at the comparison chart below:

Investment optionsLock-in Period Returns
Public Provident Fund15 years7% to 8%
National Savings Certificate (NSC)5 years7% to 8%
National Pension System (NPS)Till Retirement ~8% to 10%
ELSS3 years~15% to 18%
5-Year Bank deposit5 years6% to 7%

Wondering how to invest in ELSS?

ELSS screenshot

Well don’t be, MyWay Wealth is one such online investment and mobile app, that allows you can invest in ELSS funds with just a few clicks. All you need to complete it a paperless KYC (Know Your Customer) process and your all set to Save Tax with NPS

Takeaways

  1. Save up to 46,800 in taxes
  2. Lowest lock-in of 3 years.
  3. Get instant investment proof.
  4. Highest returns among 80C options.

Stop fearing risk, instead remember to stay invested and leverage the benefits of ELSS. Begin your journey with “MyWay Wealth.”

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