Is ELSS Better Option As A Tax Saving Investment ?

Is ELSS Better Option As A Tax Saving Investment ?

The crash of stock market in the month of March is good opportunity for investors to opt for Equity Linked Saving Scheme because unit price of those scheme shall also be lower on account of crash in stock market. That is not the only reason for recommending ELSS as an 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 lock 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 .

2. 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.

3. Chance of better returns

The prediction about Indian economy , makes a case for long term invst 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.

So what are those ELSS plans?

Given below is the list of ELSS which were ranked by ICRA for giving Award for performance of the fund . The rank was for performance by the ELSS funds for one year period ending 31/12/2007. Choose your own!

ELSS- One Year Performance

Rank For Year Ending 31/12/2007

1. PRINCIPAL tax savings Fund
2. Principal Personal Taxsaver
3. Birla SunLife Tax Relief 96
4. Kotak Taxsaver - Growth
5. DWS Tax Saving Fund - Growth
6. Sundaram BNP Paribas Taxsaver -
7. (Open Ended Fund) - Growth
8. Fidelity Tax Advantage Fund - Growth
9. SBI Magnum Tax Gain Scheme 93 - Growth
10. UTI Equity Tax Savings Plan - Growth
11. ABN AMRO Tax Advantage Plan - Growth
12. Birla Equity Plan - Growth
13. Franklin India Taxshield - Growth
14. Tata Tax Saving Fund
15. HDFC Taxsaver - Growth
16. Reliance Tax Saver Fund - Growth
17. HDFC Long Term Advantage Fund - Growth
18. ING Tax Saving Fund - Growth
19. ICICI Prudential Taxplan - Growth

[ Ranking Source :ICRA Mututal Fund Award ]

Great Tax Planning!

After three years sale those units , get tax free redemptions and invest in ELSS again to claim the tax deduction You will never be short of funds for tax saving purpose!