In 2023, the new tax system became the default system. This means that taxpayers must opt out of the new tax system to allow them to claim tax exemptions given under sections 80C, 80D, 80G, etc.
The provisions under Section 80C allow taxpayers to claim deductions for investments in a variety of financial instruments, including small savings schemes, Public Provident Funds (PPFs), and life insurance premiums.
These tax instruments also include Stock-Linked Savings Schemes (ELS) that give taxpayers regular income tax credits. £1.5 lakh.
Should investors stop investing in stock-linked savings schemes as the new tax system does not offer such exemptions?
What is an ELSS scheme?
The ELSS Mutual Fund invests at least 80% in its stock in accordance with the Equity Linked Savings Scheme, 2005, informed by the Ministry of Finance. These schemes have a 3-year lock-in period (the shortest of all other saving options).
The total number of stock-linked savings schemes is 43, with total assets under management (AUM) £Rs 232 lakh reveals the latest AMFI (India Mutual Funds Association) data as of January 31, 2025.
These are some of the reasons why investing in an Equity-Linked Savings Scheme (ELS) still makes sense.
Why invest in ELSS?
I. Growth Opportunities: These are fair schemes and provide opportunities for growth in the long term.
ii. 3 Year Lock-in: Equity gives a handsome return in the long term, so a 3 Year Lock-period Lock works for the benefit of investors.
iii. Good Returns: These schemes tend to offer good returns. Over the past three years, ELSS gave a return of 14.56% as a category, showing morning star data. The top performers received a return of 24.04%, while the bottom performers have achieved 8.07% over the past three years.
IV. Lumpsum or SIP: Since you choose to invest in stocks through mutual funds, you can choose your Lumpsum or SIPS (System-based Investment Planning) options based on what suits you. Choosing SIP will allow you to get a sense of fairness by investing in small tranches such as £500 per month.
This also helps you to buy in different price ranges, so you can take advantage of the average Rs.
V. can choose the old tax system. Additionally, if you want to request an ELS tax exemption, you can opt out of the new tax regime and choose the oldest one. Under the older tax system, you can claim exemptions under Section 80C, which covers ELS.
Note: This story is for informational purposes only. Please consult your Sebi registered investment advisor before making investment-related decisions.
