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Aim to get twin benefit of Wealth creation and tax saving by investing in an ELSS

Aim to get twin benefit of Wealth creation and tax saving by investing in an ELSS

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Last Updated On: 13 Nov 2024

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Aim to get twin benefit of Wealth creation and tax saving by investing in an ELSSAre you at your wits’ end trying to understand tax provisions, planning your tax deductions and filing returns? If you are, then you aren’t alone. You have esteemed company of Mr. Albert Einstein - the Nobel Prize winning physicist who developed the theory of relativity. Einstein once said that "The hardest thing to understand in the world is the Income Tax". While you (and Mr. Einstein, of course) can be excused for getting bogged down by the prospect of tax planning, one cannot run away from the fact that one has to pay taxes and if you have to pay them, you might as well make the most of tax provisions which reduce your tax burden. Economist John Maynard Keynes went to the extent of saying that “The avoidance of taxes is the only intellectual pursuit that carries any reward”. Looking beyond Keynes’ sarcasm here, one can certainly agree that planning your finances in a way that reduce your tax outgo can certainly prove fruitful. Although you may feel that tax authorities tax almost every Rupee that you earn, they do give you some breathing space by providing for various deductions from taxable income. One such provision viz. Sec 80C provides for deduction of up to Rs 1,50,000 for life insurance premium, various eligible investments etc.While life insurance premium, contribution to EPF (Employee Provident Fund) could contribute a portion of your 80C deductions, what needs to be thoughtfully considered is what you do with the remaining investible amount eligible for tax deduction. Most of us invariably end up delaying such investments till January, when finance department of our organization comes knocking on our doors for investment proofs. As the old adage goes-haste makes waste and ad-hoc, ill-conceived tax saving investments merely serve the purpose of reducing tax outgo and nothing else. While there is no dearth of avenues eligible u/s 80C, comparing their features can help you make a well-informed decisionWhy ELSS has an edge over other 80C eligible instruments?Shorter lock-in period of 3 Years compared to 5 years for ULIPs, NSCs, Tax Saving FDs, 15 years for PPFs and 21 years for Sukanya Samriddhi Yojana (SSY). Lock in period of 3 years is also a blessing in disguise and ensures that your investment is not impaired by short term volatility of equities.HDFC Tax Saver with a track record of more than 26 years is an ELSS which provides a viable avenue for investors looking to get the dual benefit of wealth creation and tax saving. The Scheme focuses on maintaining a portfolio of good quality companies with an emphasis on valuation discipline. Considering the long-term nature of investments in the Scheme, stock selection will be strategic and long term in nature, instead of tactical. Since inception^, the NAV of the scheme has grown ~213$$ times vs ~35 times times for benchmark NIFTY 500 TRI (As of 30th November 2022). This amounts to a CAGR return of ~22.26%$$ for HDFC TaxSaver vs ~14.20% for NIFTY500 TRI**HDFC TaxSaver - SIP Performance - Regular Plan - Growth Option

 

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