1. For a regular taxable earner, ELSS fund is undoubtedly a front-runner in Sec 80C tax-saving instruments, enjoying EXEMPT-EXEMPT-EXEMPT tax status, with lowest lock-in period and likely higher market-linked long-term returns, throughout his earning years.
2. However, being primarily tax-related, it should be judged on this aspect first before including it in a senior citizen's MF portfolio.
3. If he's still earning a taxable income, it's inclusion in the portfolio is essential, to the extent required for reducing his tax outgo.
4. If his total income is not going to be taxable even if he is earning, a diversified portfolio of liquid, aggressive hybrid and multicap funds would better suit his current needs (with no lock-in) and long-term goals (with likely higher returns, as ELSS is mostly largecap), by availing LTCG tax benefits on planned withdrawals.
5. Such a portfolio will also be more handy in his twilight years, or when he becomes a very senior citizen at 80, for maximizing returns and optimizing his withdrawals, with LTCG or STCG, in his special tax slab.
6. ELSS, like EPF and PPF, remains an E-E-E product, i.e. money is tax-exempt during investment, accumulation and withdrawal.
7. However, prescribed limits could change from time to time for all the three stages of exemption in all the products, but status remains.
8. For instance, current investment limit is 1.5 lakh, but could change.
9. In investment and accumulation stages of EPF, contribution above 12% of salary, and interest paid above 9.5%, by an employer are added to Salary Income for taxation purposes.
10. Similarly, at withdrawal stage, EPF becomes taxable before 5 years, few circumstances apart, and even 10% TDS is there at this stage.
11. Hence, implementation limits differ and change, but E-E-E status remains.
12. At investment stage, ELSS and PPF will be tax-Exempt up to 1.5 lakh, along with other (all non-equity) qualifying products.
13. At accumulation stage, both will be fully tax-Exempt.
14. At withdrawal stage, ELSS will be tax-Exempt up to 1 lakh along with other equity products, while PPF will be fully tax-Exempt.
15. 25/15/10/5-yr CAGR of ELSS is 15%/19%/13%/20%, and of PPF is 9%/8%/8%/8%.
2. However, being primarily tax-related, it should be judged on this aspect first before including it in a senior citizen's MF portfolio.
3. If he's still earning a taxable income, it's inclusion in the portfolio is essential, to the extent required for reducing his tax outgo.
4. If his total income is not going to be taxable even if he is earning, a diversified portfolio of liquid, aggressive hybrid and multicap funds would better suit his current needs (with no lock-in) and long-term goals (with likely higher returns, as ELSS is mostly largecap), by availing LTCG tax benefits on planned withdrawals.
5. Such a portfolio will also be more handy in his twilight years, or when he becomes a very senior citizen at 80, for maximizing returns and optimizing his withdrawals, with LTCG or STCG, in his special tax slab.
6. ELSS, like EPF and PPF, remains an E-E-E product, i.e. money is tax-exempt during investment, accumulation and withdrawal.
7. However, prescribed limits could change from time to time for all the three stages of exemption in all the products, but status remains.
8. For instance, current investment limit is 1.5 lakh, but could change.
9. In investment and accumulation stages of EPF, contribution above 12% of salary, and interest paid above 9.5%, by an employer are added to Salary Income for taxation purposes.
10. Similarly, at withdrawal stage, EPF becomes taxable before 5 years, few circumstances apart, and even 10% TDS is there at this stage.
11. Hence, implementation limits differ and change, but E-E-E status remains.
12. At investment stage, ELSS and PPF will be tax-Exempt up to 1.5 lakh, along with other (all non-equity) qualifying products.
13. At accumulation stage, both will be fully tax-Exempt.
14. At withdrawal stage, ELSS will be tax-Exempt up to 1 lakh along with other equity products, while PPF will be fully tax-Exempt.
15. 25/15/10/5-yr CAGR of ELSS is 15%/19%/13%/20%, and of PPF is 9%/8%/8%/8%.