ELSS Vs Tax Savings Fixed Deposits

Tax savings fixed deposits have a minimum lock in period of five years. Withdrawal before the expiry of the lock in period will attract tax treatment on the principal. Tax rebate for such a scheme is extended only for the principal and not for the interest unless it is reinvested. The interest amount upto 10,000 INR is non-taxable other wise 10% TDS is applicable. ELSS trumps this scheme both on counts of lock in period and tax treatment. The lock in period for ELSS is only three years and the long term capital gains and dividends are totally tax free.

Hence, ELSS wins both on count of having a lock in period of only three years and being a scheme that heavily invests in equities and equity related instruments. Along with availing tax rebates u/s 80c tax payers can also look to generate wealth with substantial returns.

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