Tax benefits are available on investment up to Rs 1.5 lakh under section 80C. Under this, tax can be saved by investing in many options, but there is also an option of ELSS in this, gradually it is becoming increasingly popular.
ELSS vs Other 80C Investments: The first month of the new financial year 2022-23 is going on but since tax saving exercise is a year-long process, it is better to focus on it from now on to avoid mistakes due to last-minute rush. Under Section 80C of the Income Tax Act, tax benefits are available on investments up to Rs 1.5 lakh. Under this, tax can be saved by investing in many options, but there is also an option of ELSS in this, gradually it is becoming increasingly popular. It is the only mutual fund that offers tax benefits, however, the biggest reason for its popularity among the options available under section 80C is its shortest lock-in period.
Retirement Planning: Make future financial planning close to retirement, worry about the expenses of diseases bye-bye
Why ELSS is popular
- ELSS has the shortest lock-in period among all the options available under section 80C. It has a lock-in period of only three years, that is, after three years, you can withdraw your money without any charge. Talking about other options, there is a lock-in period of at least five years and PPF has a lock-in period of 15 years.
- Under this, the money invested is managed professionally, which increases the scope for higher returns. Fund managers manage this in a professional manner for maximum returns.
FD vs RD: Confused about investing in FD and RD? Understand which option is better
- This is the only mutual fund in which tax deduction is available and you can save tax up to Rs 46800 in a year. Although the maximum limit of section 80C under ELSS can be deposited more than Rs 1.5 lakh but tax benefits are available only on deposits up to Rs 1.5 lakh. Apart from this, dividend distribution tax and capital gains tax have to be paid in this. Long term capital gains of more than Rs 1 lakh are taxed at the rate of 10 per cent (surcharge and cess extra) and tax is payable at the slab rate by adding dividends to the overall income.
- Despite the return being taxable, ELSS is becoming more popular than PPF and ULIP because it has higher returns even after deducting the tax. As per the available data, ELSS with more than 10 years has given returns of above 12 per cent so far, in comparison, PPF has given returns of 8 per cent. However, the current rate of PPF has come down further, 7.1 per cent.
Account linked Mobile Number Change Process: You can change the mobile number associated with your bank account sitting at home, step wise understand the whole process
- Flexibility is also a special feature of ELSS. Let’s say you have taken a ULIP plan directly from the insurance company, which is giving equal returns to ELSS in the long run, even then it beats ELSS in one respect. If you are not happy with your ELSS fund then you can shift to some other fund whereas in case of ULIP you can only shift to the fund offered by the same ULIP.