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How ELSS helps you save tax, how do you get more out of your money? Know the answer to all your questions

New Delhi.Taxpayers always do their best to save their taxes, especially under the provisions in section 80C of the income tax. There are more than a dozen ways to save tax in this section, and choosing one of these suitable methods is no easy task. Some of these dozens of products offer guaranteed returns, while others offer market-related returns. Under section 80C in the 30 percent income tax ceiling, an individual can get a real tax benefit of Rs 46,800 per year with the existing tax rules (with 4 percent education tax) by investing a full Rs 1.5 lakh in a financial year. When it comes to tax savings, a paid taxpayer takes the path of significant tax savings through contributions to the Employees Provident Fund (EPF). This limits the opportunities to invest in other options that will yield a fixed return on the balance below the Rs 1.5 lakh limit. Equity Linked Savings Scheme (ELSS) is the better among the market-linked options. Let us know the answers to any question from Ajit Menon, CEO (PGIM India Mutual Fund). Question: What is ELSS? answer: ELSS is a category of equity mutual funds, in which tax exemption is available under Section 80C of the investment income tax. Under current tax regulations, the eligible investor (person / HUF) can invest up to Rs 1.50,000 in equity-linked savings scheme (ELSS) under Section 80C of the Income Tax Act, 1961 (along with other fixed investments) for his gross total income. Have the right to deduct. The above mentioned tax savings of Rs 46,800 is based on the higher income tax plate. By adding the existing 4 percent education tax on tax inclusive of tax, the tax savings per year would be 31.2 percent or Rs 46,800 for Rs 1.5 lakh. Long-term capital gains and dividend tax will also have to be paid on this.Also read: India has left the world behind in this matter! Overview of transactions in the middle of the Corona crisis Q: How can tax be saved? answer: The tax benefit is subject to the provisions of the Income Tax Act 1961 and changes made to it from time to time. However, it is important to note that tax savings through ELSS investment are only possible if the taxpayer opts for the existing tax rate regime. In the new tax rate regime, the taxpayer does not enjoy any deductions. To qualify for an investment in ELSS as an equity fund, the minimum equity investment must be 80 percent, which technically can be up to 100 percent. ELSS also has the liquidity to invest in all market capitalization, making it a flexible and unique investment product among equity funds.
Question: How long can you invest? answer: The minimum lock-in period of three years for investments in ELSS is, while the lock-in period of 5 years is common with other tax-saving instruments. A three-year lock-in means that you cannot sell units purchased before the completion of three years from the purchase date. Mutual fund investments are made possible through the Systematic Investment Plan (SIP) and can be invested year round at Rs 12,500 per month, rather than a last-minute setback. However, the lock-in period varies for each SIP term, which means that every monthly SIP remains locked for a period of 3 years. Also read: 4 big decisions made by the government of Modi in the interest of the common man, know what the effect will be Question: Better return method answer: Another reason for choosing ELSS as a tax saving option is the potential to generate higher yields. Investing in stocks effectively yields better returns that are higher than the normal inflation rate. On the other hand, most fixed-return tax-saving options like PPF, 5-year FD, NSC, etc. can barely outperform inflation. Not only this, in the past decade the fixed revenues of such tax-saving products have declined, diminishing its appeal to them as well. Question: The tax on the profits of ELSS is levied. answer: The return on investment in ELSS and the amount received at redemption are also completely tax free. ELSS offers better after-tax returns as long-term capital gains (LTCG) of up to Rs 1 lakh per year from ELSS mutual funds are exempt from income tax. Profits that exceed this limit are subject to tax at a rate of 10 percent. The benefit of tax savings options other than PPF is subject to partial or full tax payment. The tax savings in ELSS and the ability to create wealth make it a suitable and better first investment option for all investors. For the first time, investors are benefiting from mandatory lock-in and incentivized by tax savings. Experienced investors can take advantage of the inclusion of ELSS in their investment portfolio to achieve their financial goals. In general, taxpayers can take advantage of several features of ELSS to reduce their income tax liability, gain experience in mutual fund investment and wealth creation.

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