There are several sections of the IT Act which tell us how to save tax in India. If you are thinking of how to save tax in India, then you cannot miss the ELSS schemes. ELSS funds mostly invest in equity and equity-linked instruments. The very small percentage is invested in debt funds.
Up to this financial year, the returns on ELSS schemes are exempt from tax. However from next financial year, a long-term capital gains tax of 10 % will be levied on earnings of Rs 1, 00,000 or more and ELSS returns will be taxed if returns are 1, 00,000 or more.
In spite of 10 % long-term capital gains taxation over Rs 1 lakh returns, ELSS will continue to be among the top preference of investors as returns will continue to be well in double digits.
ELSS fund features
If you are thinking of how to save tax in India, do not miss out the top performing ELSS schemes. ELSS schemes are equity-linked open-ended mutual fund plans. Most ELSSs have a lock-inperiod of three years. ELSS Company may charge investors a certain exit load of 1 % if investors choose to withdraw their investments before completion of the lock-in period. There are however several mutual fund companies which do not charge any exit load.
When the question arises as to how to save tax in India by taking advantage of equity investment, ELSS features offer the best option. ELSS fund units can be traded like equity stocks. The price of each unit of ELSS fund is the present NAV of the fund. NAV of funds are published on the web pages of the equity mutual fund at the closing of each day,and NAVs can rise and fall. Units of ELSS are traded on their NAVs.
Most investors start pondering upon the question how to save tax in India, investing in top performing ELSS funds can prove to be worth it. ELSS fund portfolios are managed portfolios,and fund managers regularly screen funds for risk and volatility.
ELSS premiums and tax treatment
Most investors who seek to know how to save tax in India through investment in mutual funds may get confused while filing their income tax returns and claiming the applicable deductions and exemptions. This is especially in the case of investors who have invested in two or more tax benefit funds.
Section 80 C contains maximum provisions as to how to save tax in India through investment schemes. ELSS schemes are applicable for tax deductions up to the limit of Rs 1.5 lakh. Investment in ELSS fund plans can be made as lump sum yearly amount or as SIPS. The total amount paid in a financial year either by lump sum or through SIP mode is deductible from the income base. Deduction from the income base reduces the taxable income amount.
Section 80 C lays down the detailed guidelines on how to save tax in India. ELSS is included among the schemes which qualify for tax exemptions in India. The maximum deduction allowed under section 80 C is Rs 1.5 lakh. If an investor has not invested in any other scheme then the entire Rs 1.5 lakh deduction can apply to ELSS, or else investor can invest up to the deduction limit still available.
ELSS returns and tax treatment
The money invested in ELSS is subjected to growth through returns and dividend payouts. Several other benefit features may also apply. At the end of the lock-inthe period the investor can withdraw the accumulated amount or may continue with the fund. Many investors may think about how to save tax in India on ELSS returns.
Tax deduction and tax exemption are confusing terms for several investors. There is a further tax benefit associated with ELSS investment apart from the tax deduction allowed under section 80 C. Investors who want to know how to save tax in India should also refer to section 10D. Section 10 D exempts taxes on certain listed sources of income including ELSS returns.
There can be several sources of income apart from salary/business/property income,and these include returns from investments and even interest returns on a savings account. If the investor is concerned as to how to save tax in India on invested income, then ELSS investment provides a lucrative option.
If an investor wants to know how to save tax in India through the best possible equity scheme, then ELSS scheme should be given highest ranking for low lock-inand returns around 18-19 % (post three years).
ELSS dividend payout and tax treatment
Investors may wonder on how to save tax in India by investing in mutual funds that pay dividends. Asset management companies that offer ELSS schemes with dividend payout option announce dividends whenever there is any surplus on the fund.
Investors need notto worry about how to save tax in India on dividends announced on their ELSS investment if they choose to feed back the dividend into the fund. Investors can also opt for dividend pay out.
The dividend pays out received from ELSS investment is exempt from taxation as per section 10 D schedule. So investors who opt for dividend payout option may not worry about how to save tax in India on the dividend payout as any kind of income from ELSS is exempt from tax. However from next FY if the amount is greater than Rs 1 lakh, then investors may have to think about how to save tax in India on the dividend payout.
If the dividendis not withdrawn, then the investor may choose to withdraw the lump sum at the end of lock-in. An investor may wonder how to save tax in India on the lumpsum, but entire lump sum as such is not taxed. Only benefits on investments are taxable, but for ELSS these are tax-exemptatleast till this FY.
ELSS fund growth and tax treatment
ELSS investments are subjected to growth. Investors who worry about how to save tax in India, may wonder whether the fund growth is taxable. For example, an investor may have invested Rs 1,00,000 in ELSS scheme,and at the end of lock-inperiod of three years, the fund may have grown to Rs 1,45,000 due to good enough returns and dividends earned by the scheme.
How to save tax in India on investment growth is concerned with the question of how the returns from the investments are taxed. The growth in the invested money is due to accumulated returns,and only the returns can be taxable. How to save tax in India on mutual fund growth is actually a question of how to save tax in India on mutual fund returns.
An investor may choose to withdraw lump sum amount at the end of lock-in period, so a question may arise how to save tax in India on this whole amount. The investor need not worry on this issue as till this FY any kind of benefit received from ELSS whether returns or dividends are exempt from tax.
As per recent announcements by the government of India on long-term capital gains taxation, any kind of benefits received from ELSS would also be considered taxable if the benefit amount is greater than Rs 1, 00,000 in the FY. The tax will be 10 % on the benefit component of the entire lump sum. There can be several options as to how to save tax in India on ELSS returns from next FY,and those would depend on the investor preference. Many investors may stop worrying about how to save tax in India on ELSS schemes from next FY as even after 10 % deduction on returns top ELSS schemes would continue to offer unmatched lucrative returns.
ELSS loss and tax treatment
In the case of ELSS scheme loss, investors may worry about how to save tax in India on ELSS lost money. As per the provisions of Indian IT Act 1961, any loss from the business can be claimed for a tax deduction and can also be carried forward to the next FY. Investors who are thinking about how to save tax in India in case of loss in ELSS scheme would need to figure out many details.
The loss in ELSS scheme is a confusing concept, as ELSS schemes may show negative returns till over one year. By the end of three years, the returns may become highly lucrative and five year returns can be substantially high. Investors who keep thinking about how to save tax in India in the event of a loss in the invested scheme should not think about withdrawing invested money from ELSS scheme atleast before three years. However, if an investor withdraws loss amount, then its tax treatment cannot be the same as a business loss as this is a loss from equity.
Top performing ELSS funds in India
Investors who keep thinking about how to save tax in India may find the intricacies of the taxation system quite confusing. Such investors are constantly on the look out for investment options that would attract minimum taxation or even nill taxation. How to save tax in India through ELSS returns is not much of a concern as returns from equity investment are not taxable in India.
Investment in top performing ELSS funds not only comes up as a positive option for the question of how to save tax in India but also is in itself a very lucrative investment option.
The Policy bazaar portal provides the latest information on all investment schemes. Top performing ELSS can be compared and can be the best option for how to save tax in India.
Top performing ELSS have very high returns as compared to other investment options. Investors who are thinking of how to save tax in India through ELSS options need to especially look out for the tax saving ELSS schemes. Investors can check out the returns trend and daily NAV of the top tax saving ELSS schemes any time from the portal.
ELSS best investment method for retirement
ELSS is emerging as the best investment option for retirement. People who are near retirement age may think more about how to save tax in India post-retirement, especially because post-retirement the income sources dwindle. People approaching the senior citizen age group and worried about how to save tax in India should work out their possible incomes after they choose to retire. Latter life stage is associated with a myriad of concerns including health, debility and disability and people who want to remain in good financial position even after retirement and much into their old age should not only think about how to save tax in India but also how best to invest in India.
When investors start thinking about how to save tax in India, ELSS may feature among several investment options. Yet ELSS is not only a lucrative option because of the associated tax benefits. No other investment scheme is offering high returns to the tune of 19-20 % and even more with a low lock-inperiod of three years.
Choosing ELSS plan for retirement investment
People near retirement worry much about how to save tax in India. They are much worried about the effect of taxation on their wealth corpus. All authorized ELSS schemes qualify for tax benefit under section 80C and can be among the answers as to how to save tax in India. Top ELSS schemes are not only about how to save tax in India but about the unmatched returns.
How to save tax in India seems a small issue when compared to the ELSS scheme gains. While choosing ELSS scheme, investors can compare on parameters like risk and volatility, recorded returns, lock-in period, SIP option, SWP option, minimum investment required and fund management. ELSS schemes are ideal for investors who want to get a flavor of investing in equity. ELSS schemes are continuously managed for risk and volatility against standard benchmarks. ELSS offer time saving, lucrative and managed risk investment options.Updated Date: 06 December 2018, 06:25