What are tax saving ELSS funds?

Tax-saving ELSS Mutual funds are eligible for tax deductions under Section 80C. These funds invest in stocks and are hence linked to stock markets. These funds have a lock-in period of 3 years (lowest of any tax-saving option) and hence the investors can not withdraw their money before the 3 year period. These are the only Mutual funds that have a lock-in

What are different tax saving(80C) options?

Following are the popular tax-saving investments that you can use under the 80C section:

  • Home loan principal: If you are servicing a home loan, the principal amount (up to a limit of 1 lakh) is eligible for deduction under the 80C section.
  • Provident fund: If your employer is deducting PF from your CTC, the entire employee-side contribution of the PF amount is eligible for deduction under 80C.
  • Life insurance premiums: The premium amounts that you pay for life insurance policies for yourself and your family is eligible for 80C deduction.
  • PPF: PPF or public provident fund is also another popular tax-saving instrument under the 80C deduction.
  • Child’s tuition fees: The yearly tuition fees paid for your child’s schooling is also eligible for deduction under the 80C deduction section. Fees paid for pre-school is also eligible for deduction.
  • Equity-linked savings schemes (ELSS): Tax-saving mutual funds, such as the 1 st ranked DSP BlackRock Micro Cap Fund Growth with 3-year lock period, gives investors zero tax liability on investments and paid dividends.
  • Other investments: Additional investments that qualify for 80C tax deductions include unit-linked insurance plans (ULIPs), national savings certificate (NSC), national pension schemes, and the Kisan Vikas Patra (with a lock period of 5 years).

How much should I invest in tax-saving?

You can invest up to Rs.1.5 Lakh under section 80C. However, you can use our tool above to figure out how much has already been done by you or your employer.

How do I pay less tax?

When you invest in ELSS mutual funds, the amount you’ve invested gets reduced from your taxable income. So if you invest Rs.1,00,000, your taxable income reduces by this amount and if you are on the highest slab, you reduce your taxes by Rs.30,900.

Till when can I finish tax-saving?

If you are a freelancer or independent taxpayer, the last day for making an ELSS investment is 31st March. If you are making an investment, please ensure that the fund allotment happens before 31st March. Hence, you should make your investments before 30th March before 2pm.

For employees, you need to submit your declaration proofs before December 31st or Jan31st. Please check with your HR department. To ensure you have your proofs ready, please ensure you have made your investments before these dates. The last day for you is also 31st March, however, you would have to claim a reimbursement from IT department as your proofs would not show the full amount.

What is the lock-in period in ELSS?

3 years. It is the lowest amongst all tax-saving investments.
ULIP -5 yrs, FD 5yrs, PPF 15 yrs, NSC 5yrs

How does Lock-in work in SIP?

In a SIP, every transaction has a 3yr lock-in. Example: SIP of Rs.5000 monthly. Transaction made in Jan 2017 can be withdrawn after Jan 2020. Transaction made in Feb 2017 can be withdrawn in Feb 2020.

What are various tax slabs?

Income Tax Slab for Individual Tax Payers & HUF (Less Than 60 Years Old) (Both Men & Women)
Income Slab Tax Rate
Income up to Rs 2,50,000 No Tax
Income between Rs 2,50,000 – Rs 5,00,000 5%
Income between Rs 5,00,000 – Rs 10,00,000 20%
Income more than Rs 10,00,000 30%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

Cess: 3% on total of income tax + surcharge.
*Income tax exemption limit for FY 2017-18 is up to Rs. 2,50,000 for individual & HUF other than those covered in Part(II) or (III)

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