By Rahul Pithadia-
An individual has number of Tax-Saving options available for himself to claim his/her tax deduction. Out of this multiple option investment in ELSS Mutual fund proves to be the best alternative as it provides number of advantages along with good returns. ELSS (Equity Linked Saving Scheme) is ideal for those investors who wish to save tax. ELSS Fund is a kind of mutual fund scheme that invest majority of its corpus in Equity or Equity linked products.
Below is a general chart which shows that how ELSS is beneficial to Investors as compared to other Tax Saving or general Investment options –
Following are the 5 key reasons why one should prefer ELSS funds –
- Tax Benefit: Investment in ELSS fund are eligible for Tax Deduction under 80C section of income tax act 1961 this become one of the primary reason to invest in ELSS fund.
- Lock in period: ELSS funds as a lock in period for 3 years which is lower when compared t other tax saving investment option as PPF has a lock in of 15 years while Tax saving FD’s as a long for 5 years and NPS until 60years of age
- Benefit from equity exposure: ELSS allows to reap the benefits of stock market as majority of their corpus is invested in Equity and Equity leaked product.
- Investment through SIP: An investor can invest in ELSS fund with the help of SIP’s of as low as 500 Rs per month. Since there’s a lock in period of 3 years, if you start an SIP in Equity Linked Saving Schemes, the returns for your SIP amounts will be generated every month after 3 years of the first investment.
- No maturity date: ELSS funds don’t have a maturity date. This is a big advantage because you can continue investing in them even after the lock-in period has expired. Your investment in an ELSS fund can be continued with or without further contributions.
Birla Sun Life Tax Relief 96 – Growth Weekly Chart
Birla Sun Life Tax Relief 96 is an open ended Equity Linked Saving Scheme (ELSS) with 98.31% exposure to equity.
Portfolio Analysis: The fund aims to generate returns by investing in complete equity with maximum exposure to Banking/Finance and Automotive sector.
Risk Profile: This fund is considered as “Risk Fund” due to complete exposure to equity instruments, therefore it’s suitable for investors who are looking for Tax benefits.
Taxation Perspective: Birla Sun Life Tax Relief 96 is ELSS fund is where investor is eligible for tax exemptions up to 150,000 INR under section (u/s) 80C of the Indian Income Tax Act, 1961 if they stay invested for three years or more. ELSS Funds are also eligible for Long Term Capital Gains which will be treated tax free as the holding will be more than one year. The Dividend earned from ELSS funds is also treated as tax free.
Technical Perspective:From the above chart, depicting the weekly performance of the Franklin India Opportunities Fund, it can be observed that after completion of the intermediate wave v in the start of 2015 and prices are forming complex correction pattern. Internal structure of the same suggests that wave x is completingits course and forming a flat correction. As per this count, one down move is still pending in the form of wave y.
Investment Rationale: Birla Sun Life Tax Relief 96 fund has shown some outperformance despite of no clear trend in the Indian Equity Markets. We can expect the same in this fund to continue for next few weeks and one leg is still pending on downside which should provide excellent buying opportunities for lump sum investors.
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