The Top ELSS Funds for FY 2019-20
January-February is the season when most salaried employees do their last-minute tax-saving investments since they must submit proof of it to their company by the end of February.
A popular investment for tax-saving is the Equity-Linked Saving Scheme (ELSS). ELSS are mutual funds schemes that have a three-year lock-in and offer tax benefits under Section 80C of the income tax act. You can save up to Rs 46,000 in taxes if you are in the highest tax bracket and invest Rs 1.5 lakh in a financial year in ELSS.
So, how do you choose the top or best ELSS funds in India?
One of the ways to evaluate any mutual fund is its performance over time – one year, three years, five years. While past performance is not a guarantee for the future, it acts as an indicator, other things being equal.
To get the top ELSS funds for FY 2019-20, we must look at their overall performance for the year, and the returns they have been able to generate.
IndiaNivesh experts have curated a list of the top ELSS funds in India. These funds have not only been among the top performers during the last year but have shown consistent performance over the years.
- How to save Rs 45k by investing in ELSS!
Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Why ELSS Funds Is One Of The Best Tax Savers Under 80C
Every year, around this time, everyone seeks to make investments to save tax at the end of the financial year. Some of the popular tax-saving investments include Public Provident Fund (PPF), life insurance policies, National Pension Scheme (NPS) and fixed deposits. But one of the most effective tax-saving instruments under Section 80C of the Income Tax Act is the equity-linked savings scheme or ELSS. It's a great investment-cum-tax saving option for young and old alike.What is ELSS?ELSS is a mutual fund scheme that invests its corpus in the equity markets and aims to generate market-linked returns. You can claim an income deduction of up to Rs 1.5 lakh under Section 80C – which means you can reduce Rs 1.5 lakh from your taxable income. You can save up to Rs 46,800 in taxes if you are in the highest tax bracket by putting money in ELSS.ELSS has a lock-in period of three years from the date you begin your investment. After this period, you can withdraw the funds. Equity markets tend to deliver better returns over the longer term and hence a three-year lock-in works in favour of the investors.Why is ELSS one of the best tax-saving options?Many experts believe that ELSS is better than all other 80C investments due to the following reasons1. Higher returns: The best ELSS funds deliver 15-20% annualised returns over time-frames of five years and longer. This is higher than all other options. Of course, equity-linked investments carry greater risk, but over the longer-term it is a good option.2. Shorter lock-in: Most 80C investments have lock-ins of five or more years. ELSS comes with a lock-in of just three years3. Tax-efficient returns: Though long-term capital gains were introduced on mutual fund returns from last year, ELSS still provides among the most tax-efficient returns, barring PPF and NPS, whose returns are tax-free. 4. Flexibility and choice: It’s easy to buy and sell ELSS units. You can invest in a lump sum or through an SIP. What’s more, you can choose from a wide range of schemes that matches your needs.But how do you choose an ELSS?It's not the easiest job selecting the ELSS you want to invest in. Which is why our experts have picked a set of funds that you can consider. ELSS Performance as on 10-Dec-2018 Lumpsum or SIP in an ELSS?Experts recommend that one of the best ways to invest in the equity markets is through a systematic investment plan, because it reduces the risk of volatility. However, when it comes to ELSS, do remember that each of your SIP investments will mature after three years from the date of that investment. For example, let’s say you start a Rs 10,000 monthly SIP on April 1, 2019. Your last SIP instalment for the year would be March 1, 2020. While the lock-in on your first investment will end in April 2022, your last investment will mature only in March 2023. Hence, keep in mind your liquidity and cash flow requirement while making the investment. It is advisable to invest in ELSS in fewer instalments rather than monthly SIPs. DisclaimerInvestment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Top 5 Tax Saving Options For The Salaried in FY19-20
Salaried employees need to thoroughly chalk out their annual tax plan. They are required to make some important decisions at the beginning of each financial year and ensure they adhere to their plan. But tax planning takes a lot of discipline. You must ensure that your investments can do both; exempt you from certain taxes and safeguard your investment objectives so that you can fulfil your financial goals. Let us look at some of the best tax saving options in India for salaried employees. Maximise 80C- PPF and ELSSPPF or Public Provident Fund account holders can avail tax benefits by depositing as much as ₹1.5 lakh per year in their PPF account. You can deduct the amount you invest in PPF from your income and reduce your taxable income. The interest earned on PPF deposits is also tax-free. ELSS or Equity Linked Savings Scheme is another worthy investment option that provides income deductions of up to ₹1.5 lakh per financial year. It is one of the most popular options among 80C investments despite the introduction of long-term capital gains on equity investments last year. Over the long term, ELSS has the potential to provide higher returns than most other investments and comes with a shorter lock-in tenure of only three years. Maximise 80C- PPF and ELSSA social security initiative launched by the Central Government, the National Pension Scheme or NPS enables investors to avail tax benefits under various sections of the Income Tax Act such as: Under Section 80CCD (1) – In a financial year, investment of up to ₹1.5 lakh is eligible for deduction, within the overall ceiling of ₹1.5 lakh under Section 80C. Under Section 80CCD (1B) – Investors are eligible for an additional tax benefit on investments up to ₹50,000. If a taxpayer contributes over ₹1.5 lakh to NPS, the amount exceeding ₹1.5 lakh may be claimed as a deduction. Under Section 80CCD (2) – Exceeding the ceiling limit of ₹1.5 lakh and the additional limit of ₹50,000, investors are also eligible for deduction on employer contribution up-to 10% of salary (basic + DA) without any monetary limit. Maximise Health Insurance SavingsFor tax saving options other than 80C, you can put your money in health insurance. Buying health insurance is as wise as it is vital because it safeguards your family and you during medical emergencies by covering the cost of the treatment. Apart from offering services like cashless hospitalisation facility, it also comes with several tax benefits. You can avail income tax exemption under Section 80D, based on the premiums you pay on health insurance policies purchased for yourself, your family (spouse and children) and parents. However, the deduction depends on the person insured. Payment should be made through methods other than cash. If you are under 60 and purchasing health insurance for yourself, your spouse and dependent children, you are eligible for a maximum deduction of ₹25,000. If you are paying for health insurance for your parents under 60 years of age, you become eligible for an additional deduction of ₹25,000. If they are over 60, you can claim up to ₹50,000 If you are over 60, you can claim a deduction of ₹50,000 on premium paid towards health insurance for yourself and your family. If you are also paying the insurance premiums for your senior parents, then you are eligible for an additional deduction of ₹50,000 making your total savings ₹1,00,000. You can also claim up to ₹ 5,000 (paid in cash) for your medical check-up, within the above-mentioned limit. Take a joint home loan- the big tax saverJoint home loans can also prove to be a great tax saving option for salaried employees. If you and your spouse, sibling or any other family member are on a payroll; you can avail several tax saving benefits provided both applicants are registered as co-owners of the loaned property, co-borrowers of the loan and the construction of the property is completed. Each co-owner is eligible for a maximum deduction of ₹2 lakh on interest. The total payable interest on the home loan is allocated as per the ratio of ownership held by each owner. If you and your spouse purchase a home and are paying ₹5 lakh in interest, with each of you holding a 50:50 share in the property, you can both, individually claim ₹2 lakh each i.e. a total of ₹4 lakh as joint owners, in tax returns. Maximise HRA benefitAll salaried employees can avail tax exemption on a part of their HRA or House Rent Allowance as per Section 10 (13A) of the Income-tax Act. HRA benefit is provided to those employees living in rented homes. For HRA tax exemption, the deduction is the lowest amongst the following: The actual HRA received from your employer Total rent minus 10% of salary (this includes basic + Dearness Allowance, if any) Rent equal to 50% of the salary in metro cities or 40% of the salary in non-metro cities. Individuals paying over ₹1 lakh towards house rent can claim HRA tax exemption provided they furnish the property owner's PAN details, along with rent receipts. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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