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Why ELSS is best tax-saving instrument? Research Team | Posted On Wednesday, April 08,2009, 12:20 PM

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Why ELSS is best tax-saving instrument?



Equity Linked Saving Scheme

The crash of stock market in the month of March was a good opportunity for investors to opt for Equity Linked Saving Scheme because unit price of those schemes shall also be lower on account of crash in stock market. That is not the only reason for recommending ELSS as investments. The other reasons are

1. Claim Deduction upto Rs 1 lakh

Those readers who have still trying to search for an investment option for tax savings, can get deduction u/s 80C which by virtue of clause 2(xiii) gives deduction up to Rs 1 lakh.

2. Minimum lock in period.

The PPF or NSC gives you risk free returns but they have locked in period of six years, whereas ELSS has only 3 years of lock in period. SO, after three years only you can get your wealth back

3. Tax free gains

While interest from PPF is tax free, interest from NSC is taxable. Whereas in case of ELSS, not only tax on the long term capital gains is tax free, even dividends you receive are tax free.

4. Chance of better returns

The prediction about Indian economy makes a case for long term investment in equity. Therefore there is likelihood of getting much better return out of investment as the equity market is set to go up in near future again. The tax free gain will be more than the PPF or NSC. While the PPF or NSC gives you 8 % return, the return from ELSS on average annual return was more than 30% in last one year.

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