Usually towards the end of the financial year, one can often hear the phrase “Tax ka kya socha hai?” These conversations gain momentum as investors rush to understand how can they save tax or how much time is left to make the right investment. Due to the abundant options available with the investors today, it is relatively easy to get confused between the various tax saving instruments, their distinctive features and deciding which one would be most suited to them.
Furthermore, when it comes to saving taxes, investors are increasingly beginning to look beyond traditional tax saving methods. In this case, ELSS (Equity Linked Saving Scheme) has emerged as a front runner due to its vast range of benefits.
Simply put, Equity Linked Savings Scheme or ELSS Funds are tax-saving equity mutual funds. To decode ELSS and understand the nuances of saving tax and building wealth in the long run, we spoke to Chandresh Nigam, MD and CEO, Axis AMC.
Here are the key takeaways from the conversation.
What exactly is an Equity Linked Saving Scheme?
As the name suggests, Equity Linked Saving Scheme or ELSS is an equity-oriented tax-saving scheme that allows investors to seek some potential capital appreciation along with tax benefits. They allow an individual to claim a deduction of up to INR 1.5 lakhs on his/her gross annual income under section 80-C of the Income Tax Act, 1961.
ELSS has one of the shortest lock-in periods compared to other tax-saving instruments. Just three years! And it is a good thing because money stays invested, and therefore there is time for the money to grow without being perturbed by market ups and downs.
Why choose equity for long-term wealth creation?
If you have never invested in the stock market directly or through mutual funds, ELSS could very well be your initiation into equities. This is because ELSS offers the option to invest in a diversified mix of equities. At the same time, understanding nuances of tax-saving can be overwhelming when you have just begun earning.
ELSS offers multiple payment options for investors
“If you are investing in an ELSS fund at the end of the tax season, you may have to make a lump sum investment to save some taxes. However, if you want to give your ELSS investments a systematic approach, you may opt for an SIP instead. SIP is a mode of investing in ELSS or any mutual fund,” says Chandresh.
All you have to do is instruct your bank and every month on a predetermined date, a fixed amount is debited from your savings account and electronically transferred to the said fund. If you are a KYC compliant individual, you may even start an SIP in ELSS from the comfort of your laptop or smartphone with a decent internet connection.
“Start an SIP fund like this, and I think you’ll come out ahead of most other investors,” he adds.
Last minute tax planning? ELSS Hai Na!
Given that one of the most common mistakes that taxpayers make is leaving their tax planning for the last minute, Axis Mutual Fund has created its #ELSSHaiNa campaign to tell customers that ELSS for tax saving should be a ‘no-brainer’ option.
“It’s that time of the year when people scramble for tax-saving products and we wanted to position our ELSS product as a superior product that helps reduce anxiety amongst investors. “ELSS Hai Na!” Is a comforting line, I would believe, for most investors and taxpayers,” says Chandresh.
Tax planning is still viewed as a strenuous and chaotic task. Investor awareness initiatives such as #ELSSHaiNa will be instrumental in connecting with the wider masses and reiterating the importance of ELSS.
About Axis AMC: Axis AMC is one of India`s fastest growing assets managers offering a comprehensive bouquet of asset management products across mutual funds, portfolio management services and alternative investments.
#ELSSHaiNa is an investor education and awareness initiative by Axis Mutual Fund. Investors have to complete one-time KYC process. ELSS Investments are subject to a 3-year lock-in period and are eligible for tax benefit under section 80C of the Income Tax Act, 1961. Visit www.axismf.com or contact us on customerservice@axismf.com for more information. Investors should deal only with registered Mutual Funds, details of which are available on www.sebi.gov.in – Intermediaries/Market Infrastructure Institutions section. For any grievance redressal, investors can call us on 1800 221 322 or write us at customerservice@axismf.com or register complaint on SEBI Scores portal at https://scores.gov.in
Disclaimer: *ELSS investments are subject to a 3-year lock-in.
“As per the present tax laws, eligible investors (individual/HUF) are entitled to deduction from their gross income of the amount invested in Equity Linked Saving Scheme (ELSS) up to Rs.1.5 lakhs (along with other prescribed investments) under section 80C of the Income Tax Act, 1961. Tax savings of Rs. 46,800 mentioned above is calculated for the highest income tax slab.
Finance Act, 2020 has announced a new tax regime giving taxpayers an option to pay taxes at a concessional rate (new slab rates) from FY 2020-21 onwards. Any individual/ HUF opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions. Since, individuals/ HUF opting for the new tax regime are not eligible for Chapter VI-A deductions, the investment in ELSS Funds cannot be claimed as deduction from the total income.
Investors are advised to consult his/her own Tax Consultant with respect to the specific amount of tax and other implications arising out of his/her participation in ELSS”
Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to ₹ 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd.
Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the scheme
Disclaimer: This press release represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.
The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws as certified by the mutual funds consultant. Any action taken by you on the basis of the information contained herein is your responsibility alone. Axis Mutual Fund will not be liable in any manner for the consequences of such action taken by you. The information contained herein is not intended as an offer or solicitation for the purchase and sales of any schemes of Axis Mutual Fund.
Past performance may or may not be sustained in the future.
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Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
