Taxation is never liked by anyone but everyone has to deal with it. Being ignorant about how you can save taxes can cost you lot of money. One of the most popular ways of savings taxes is by investing upto 1.5 lakhs per year in tax saving investments. Depending on the tax bracket, you can save anywhere between Rs 15,000 to Rs 45,000 in taxes per year.
Now most folks in India end up investing in one go via a lumpsum investment at the end of the financial year. This involves a large outflow of cash at one go + the risk of investing in equity when the markets are high.
Let’s say you have to invest Rs 1.2 lakhs a year for Tax Saving Investments. Instead of investing it at one go, you do so via 12 monthly installments of Rs 10,000 each. Suitable for Tax Saving Investments and long term growth. Min lock-in period of 3 years.
When you invest in Tax Saving ELSS funds via a monthly SIP amount, Not only is this easier for your monthly cash flows but can you also get better returns over time.
Returns of some of the Top 5 ELSS (Tax Saving) Mutual Funds over the last 5 years
|ELSS Tax Saving Funds||Expense ratio||1 yr||3 yr||5yr||Current Val.**||5 yr SIP return|
|Axis Long Term Equity Fund||2.3%||74.7%||33.9%||24.8%||123,964||29.5%|
|IDFC Tax Advantage Fund||2.9%||57.1%||26.5%||18.4%||106,187||23.0%|
|Reliance Tax Saver Fund||2.1%||98.6%||32.8%||22.7%||124,024||29.5%|
|ICICI Prudential Tax Plan||2.1%||60.5%||26.5%||18.3%||106,449||23.1%|
|Franklin India Taxshield Fund||2.4%||65.5%||25.8%||19.4%||107,293||23.4%|
** If you had invested Rs 1000 per month in these funds, they would have grown from Rs 60,000 to almost Rs 1.2 lakhs