ELSS funds: Are they worth your buck?
Come December, and it's time to submit the proof for your tax-saving investments. Or be ready for some steep cuts in your salary. As we all are aware the annual standard deduction under Section 80 C has been enhanced to Rs 1.5 lakh from Rs 1 lakh.
But, do you want to wait till the last day to invest in a tax-saving instrument when the time is ripe to invest in equity linked savings schemes.
Markets have been off their highs. However, many on Dalal Street are confident this is the year of multi-year bull run backed by the new government, improving macroeconomic fundamentals and a step up in the financial reforms.
Secondly according to Value Research, ELSS as a category has given average returns of 19.24% (as on 28th October 2014). In the same period, Nifty posted average returns of 16.52%.
ELSS: What works?
1) Low Lock in period
The lock in period is only 3 years as compared to those of other tax saving investments, which fall in the range of 5-15 years.
2) Beats Inflation
Equity investments offer better inflation adjusted returns than most asset classes in the
3) Tax-Free Returns
The final corpus at maturity is not taxable. Even dividends (if you opt for dividend option) are tax-free. Moreover, since the lock in period is 3 years, any gain on redemption is exempt from capital gains tax.
