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Using ELSS Funds to Save Tax

You can use ELSS funds to exhaust the entire increased limit of Rs 1.5 lakh under Section 80C of the Income Tax Act

ELSS funds enjoy tax exemption under 80C of Income Tax Act. And we get tax exemption upto 1 lakh for 3 year lock-in period. After increase of 80C limit to ₹1.5 lakh in 2014 budget, is ELSS still a tax saving instrument? Can we invest the whole ₹1.5 lakh in ELSS to get tax exemption in 2014-15? If no, how much can we invest in ELSS to get tax exemption?
- Jitendra Nath Ghosh

There is no change in tax saving instruments under section 80C in this year's budget. So yes, Equity Linked Savings Scheme is one of the tax saving investments that will continue to attract deduction under Section 80C. The overall limit of this section has increased to ₹1.5 lakh from ₹1 lakh earlier. So you can invest the entire ₹1.5 lakh in ELSS funds to get this exemption. But given that this is an equity investment, do factor in the risks involved. Don't just go by the 3 year lock in period, as a volatile market can lead to negative returns from ELSS funds in the short term. You must go in for the said investment only if you have other fixed income options in your portfolio which can provide a secure return. Also spread your investments between ELSS plans of different fund houses. Quantum Tax Savings, Reliance Equity Tax Saver, ICICI Pru Tax Plan and Axis Long Term Equity are good options to consider.



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