Using 80C To Save Taxes? ELSS Might Be Your Best Solution

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  • Thursday Sep 06, 2018

As we come close to the return filing due date every year we are all compelled to think of various tax saving schemes. We start comparing various tax saving investment options. There are multiple opportunities to reduce your tax burden, all you have to do is smart tax planning and investing.

While there are various investment products under Section 80C that provide a deduction of Rs. 1,50,000 from your total income like Public Provident Fund (PPF), Employee Provident Fund (EPF), Unit Linked Insurance Plans (ULIP), National Savings Certificate (NSC), National Pension System (NPS) and tax-saving fixed deposits; Equity Linked Savings Scheme (ELSS) is fast gaining popularity.

Investment in ELSS is considered thebest tax saving avenue because it gives you dual benefit of saving taxes and getting higher returns on investment.

Let us say, your gross total income is Rs. 10.5 lakh. On claiming a deduction of Rs. 1.5 lakh under section 80C, your net taxable income is reduced to Rs. 9 lakh. This means investing in ELSS can bring down your tax liability by Rs. 46,350.

Here are few more reasons why ELSS outscores other options available under section 80C.

Why Is ELSS the Best Tax-Saving Option?

  • Higher Returns

ELSS are tax saving mutual funds that majorly invest in the equity markets. Since their returns are linked to market performance, they can provide annualised returns as good as 12% and above in the long run. While other Section 80C products only provides around 9% annualised returns. Thus, they beat all other asset classes by a huge margin.

  • Shortest Lock-In Period

All the investments under Section 80C come with a mandatory lock-in period. The lock-in period for ELSS is just 3 years, which is the shortest in comparison to all other Section 80C investments. Other investment options like National Pension Scheme have a lock-in period until your retirement, PPF has a lock-in period of 15 years and other products like National Savings Certificate, Unit Linked Insurance Plans, and tax-saving fixed deposits have a 5-year lock-in period.

  • Beats Inflation

Most of the investment instruments under Section 80C have government backing, and hence they are safe. But, the disadvantage is that they offer lower returns which may not beat inflation. On the other hand, equity funds are known to beat inflation and create wealth in the long run.

  • Option to Invest Monthly (SIP)

Another advantage of investing in ELSS is that it gives you an option to start SIPs of a specific amount in these funds. The minimum investment amount can be as low as Rs. 500. Investing in small amounts takes away the stress of paying in bulk. Moreover, it also helps bring in financial discipline.

To conclude, ELSS is one of the investment tool among other section 80C asset classes in terms of tax benefits, returns and liquidity. It can definitely be a good; bet if you are looking to create wealth.
Checkout some of the best ELSS schemes offered by

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