Come March, these tricks can help you saving on taxes

What is ELSS?

Among the tax saving instruments, ELSS i.e. the equity linked saving scheme (ELSS) constitute the most alluring avenue. ELSS is an equity mutual fund, providing capital appreciation coupled with tax benefits with the opportunity to gain from the Indian Equity markets. This diversified mutual fund is exempted from taxation under section 80C of the Income Tax Act.

Why ELSS?

The short lock-in period of 3-years gives ELSS, a cutting edge over national savings certificate (NSC) or public provident fund (PPF) with 6 years and 15 years lock-in period, respectively.

The option of dividend provides the investors an opportunity to earn even during the lock-in period. Moreover, the power of compounding helps the investors earn multiple-fold. A minimum investment of Rs 500 and no maximum limit on investment, opens more avenues for the investors. 

While, the systematic investment plan also adds more value to the ELSS scheme. Equity-link of the scheme makes ELSS open to greater earning potential. However, the equity link makes the mutual fund vulnerable to market returns, making the returns volatile and uncertain.

Exempted of any age limits, ELSS is open to young professionals seeking a diversified investment, not resisting from high risk factors.

Rebate on the ELSS Scheme:

Under section 80C, the ELSS investors are eligible for a rebate of Rs 1,50,000 along with the benefit of tax exemption from the tax levied on long-term gains from the equity investments, unlike the other equity investments.

How to evaluate the best performing ELSS ?

Apart from the evaluation of the performance of funds in the last 3 to 5 years, to identify the top ELSS, laymen can search the ranking on various platforms like Crisil & Value. 

Funds with assets under management (AUM) worth or more than Rs 100 crore, confirms the investors' confidence in these schemes and assure continual investments in these schemes in the future.

The following are the top performing ELSS: