ELSS or Fixed Deposit which should be choose for 80C deduction
Proper investment helps taxpayer reduce their tax liability systematically. Deduction under 80C is related to deduction that an individual can deduct from his gross taxable income in order to reduce his tax liability by investing in specified investment. Section 80C was introduced on 1st April 2006 which replaces the section 88 with more or less the same investment mix available in section 88. It is applicable to individuals and HUF. An assessee can get deduction under section 80C upto a maximum of Rs.150000. In this article we will learn about investment in ELSS and Tax saver deposit which are eligible investment under section 80C.
Equity Linked Savings Scheme (ELSS):
ELSS mutual funds are the class of mutual funds eligible for tax deductions. Assessee can save up to Rs 46,800 (tax deductions of up to Rs 1, 50,000) a year in taxes by investing in ELSS, which is covered under Section 80C of the Income Tax Act, 1961. However, assessee has option to invest more than this designated amount, but the excess invested over and above Rs 1, 50,000 lakh will not qualify you to avail the tax benefits as per the provisions of Section 80C. The returns generated from ELSS are taxable with the dividend distribution tax (DDT) and taxes on Capital Gains (LTCG).
Despite tax on Long-Term Capital Gains from ELSS, ELSS holds their place as one of the best tax-saving options. These equity-linked instruments have the potential to offer higher returns and are an ideal choice of investment for the long term. ELSS holds its ground, even with its returns being taxed, with higher post-tax returns than any other Section 80C investment options such as Public Provident Funds (PPFs) and ULIPS.
Tax Saver Time Deposit
Time deposits are nothing but fixed deposits also known as tax saving deposits. Conditional it must be made with a scheduled bank or under senior citizen savings scheme with a lock in period of minimum 5 years. Assessee can save up to Rs 46,800 (tax deductions of up to Rs 1, 50,000) a year in taxes by investing in Tax saving Fixed deposit, which is covered under Section 80C of the Income Tax Act, 1961. However, assessee has option to invest more than this designated amount, but the excess invested over and above Rs 1, 50,000 lakh will not qualify you to avail the tax benefits as per the provisions of Section 80C.
List of bank which offers Taxsaver FD along with current rate of interest:
|Banks||Regular Interest Rates||Senior Citizens Rates|
|SBI Tax Savings Scheme||5.40%||6.20%|
|HDFC Bank 5 Year Tax Saving Fixed Deposit||5.50%||6.25%|
|Axis Bank Tax Saver Fixed Deposit||5.50%||6.05%|
|Kotak Bank Tax Saving Fixed Deposit||5.30%||5.80%|
|ICICI Bank Tax Saving Fixed Deposit||5.50%||6.30%|
|Bank of Baroda Tax Savings Term Deposit||5.25%||5.75%|
|Corporation Bank Tax Saver Plus Deposit Scheme||5.60%||6.10%|
|IDBI Bank Suvidha Tax Saving Fixed Deposit||5.10%||5.60%|
|Citibank Tax Saver Deposits||3.50%||4.00%|
|RBL Bank Tax Savings Fixed Deposits||6.60%||7.10%|
|Central Bank of India Tax Saving Deposit||5.10%||5.60%|
|PNB Tax Saver Fixed Deposit Scheme||5.30%||5.80%|
|Bajaj Finance Tax Saving Fixed Deposit||7.00%||7.25%|
|Ujjivan Small Finance Bank Tax Saver Fixed Deposits||6.50%||7.00%|
|AU Small Finance Bank 5 Years Tax Saving Fixed Deposit||6.50%||7.25%|
|Jana Small Finance Bank Tax Savers FD||7.25%||7.75%|
|Tax Saver Fixed Deposit Scheme||6.75%||7.50%|
Which option should be chose for 80C deduction ELSS or Fixed Deposit?
Below is the comparison of both the investment options:
|Characteristics||Tax Saver Fixed Deposit (FD)||Equity-Linked Savings Scheme (ELSS)|
|Mechanism||A lump sum is deposited for a specified period that attracts a fixed interest rate||A type of mutual fund where a lump sum is invested where the returns are subject to market fluctuations|
|Risk appetite||No risk||Low to high risk|
|Returns||Guaranteed and predictable||Not guaranteed and unpredictable|
|Lock-in Period||Minimum of 5 years||Minimum of 3 years|
|Treatment at the time of redemption or maturity||No, impact of income tax at the time of maturity of FD||The Long-Term Capital Gains on ELSS are tax-exempt up to Rs 1 lakh|