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Elss in india

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Equity linked saving scheme in India economy

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Elss in india

  1. 1. Equity Linked Saving Schemes in India Presented By: Narayan Gaonkar
  2. 2. introduction Mutual fund industry is emerged in 1964 in India and developed enormously. Mutual funds could give returns with low risk than the market risk and the volatility of the mutual fund market is less than the stock market.
  3. 3. Mutual Funds:  A type of professionally managed collective investment scheme that pools money from many investors to purchase securities.  It is a trust that pools the savings of a number of investors who share a common financial goal.
  4. 4. Why people go for mutual fund..?
  5. 5. Meaning of ELSS: ELSS is a dedicated mutual fund scheme that allows investors to save tax. An ELSS fund manager invests in a diversified portfolio, predominantly consisting of equity and equity related instruments that carry high-risk and have potential to deliver the high-returns. .
  6. 6. Why should one invest in an ELSS? Equity Returns Tax Benefit Lock-in period of 3 years ELSS mutual funds helps to grow money
  7. 7. Five important facts about ELSS funds 1. Risk 2. Taxability 3.Lock-in periods 4.Growth 5. Threshold
  8. 8. 1.How much is the risk? In fact, the risk is higher in ELSS funds because you cannot exit before three years.
  9. 9. 2. What is the taxability? ELSS funds fall under the exempt-exempt- exempt (EEE) category. Investments get tax deduction under Section 80C.
  10. 10. Tax Advantage of ELSS Particulars Without ELSS/ 80C Tax Saving Investment With ELSS/ 80C Tax Saving Investment Gross Total Income Rs.7,50,000 Rs.7,50,000 Exemption Under Section 80C Nil Rs.1,50,000 Total Income Rs.7,50,000 Rs.6,00,000 Tax on Total Income Rs.80,000 Rs.55,000 Tax Saved on Investment Nil Rs.25,000
  11. 11. 3.What is the lock in period? Instrument Lock-in Period ELSS 3 Years from the date of allotment of the respective Units Bank Fixed Deposit 5 Years PO Time Deposit 5 Years NSC 6 years PPF 15 Years (Partial withdrawal after 6 years)
  12. 12. 4.Growth or liquidity? The growth plan is the cumulative option under which your investment will keep growing till you redeem it. In the dividend plan, the fund gives some amount back to if the fund's NAV has risen
  13. 13. 5.What is the threshold? Most equity funds have a minimum investment limit of R.s 5,000, but ELSS funds have a lower threshold of R.s 500
  14. 14. India – Why Invest in Equities  9% GDP growth makes India among the fastest growing economies in the world.  Indian companies today are very competitive – have growing cost-effectiveness, a confident management, global outlook & plans, etc.  As profits grow (between 15%-20%) the market would also grow at such a rate over long term since the prices always trail the profits.  The market valuations are now fair and stocks are not overvalued. For a long-term investor, the opportunity to create wealth over time is great.
  15. 15. Comparison between ELSS and other investment securities- Parameter PPF NSC ELSS Tenure 15 years 6 years 3 years Returns (Compounded Annually) 8.80 % (Compounded half-yearly) 8.60 to 8.90 % Not assured dividends/ returns Minimum investments Rs.500 Rs.100 Rs.500 Maximum investments Rs.100,000 No limit* No limit* Amount eligible for deduction under Section 80C Rs.100,000 R.s 1,00,000 R.s 1,00,000 Taxation for interest Tax free Taxable Dividends and capital gain tax free Safety/ Rating Highest Highest High Risk
  16. 16. ELSS Ranking • Axis Long Term Equity Fund • Birla Sun Life Tax Plan • Birla Sun Life Tax Relief 96 • BNP Paribas Tax Advantage Plan • Canara Robeco Equity Tax Saver • DSP Blackrock Tax Saver Fund • Franklin Tax shield Fund • HDFC Long Term Advantage Fund • HDFC Tax Saver Fund • HSBC Tax Saver Equity Fund
  17. 17. How to choose best ELSS mutual funds to invest ?  Consider Crisil Rank-1, Rank-2 and Rank-3 ELSS mutual funds  Consider top rated funds by Value research online. You can choose 5 star, 4 star and 3 star rated funds to invest.  Consider funds where the Assets Under Management (AUM) is more than R.s 100 Crores. This would indicate that such schemes have gained confidence from investors and they are investing more and more in such schemes.  Performance in last 3 to 5 years’ time frame.
  18. 18. Demerits of ELSS Risk is higher in ELSS funds, because we cannot exit before three years.
  19. 19. Conclusions  Purely from a tax management perspective, ELSS investment stands out as a preferred destination.  For others who want liquidity as well as growth and the freedom to shift through funds, then there are other avenues available as well. But from a tax saving perspective, this is a ‘must-have’.
  20. 20. Happy Investing  