Suppose, if a person has an annual income of Rs 12 lakh. Total tax to be paid will be ~Rs 1.91 lakh. However, if he invests in tax saving scheme u/s 80C, he can save tax of Rs 46,350 (30% tax bracket) and is required to pay ~Rs 1.44 lakh as a total tax.
|Annual Income||Rs 12,00,000|
|Tax before investing in tax saving scheme u/s 80C||Rs 1,90,550*|
|Tax after investing in tax saving scheme u/s 80C||Rs 1,44,200*|
|Tax saved||Rs 46,350|
Some of the benefits of ELSS investment are mentioned below.
|Less Lock-in Period||ELSS has the shortest lock-in period of 3 years as compared to other tax saving instrument.|
|Creates Wealth in Long Run||Historically, ELSS has given an average return of 12% p.a. Whereas, other instruments such as FDs and PPF have given a return of ~8 to 9 p.a.|
|Gives Investment Option||ELSS offers two investment options - Dividend option and Growth option to investors. In growth option, the dividend is not paid to investor by the ELSS scheme. On the other hand, in Dividend option investors get the dividend whenever declared by the ELSS scheme.|
|Dividends are Tax-Free||In Dividend option, dividends earned are tax-free for customers right from the year of investment. In addition, the long-term capital gains from the investment are also tax-free.|