80C Investments

Other 80C Investments VS ELSS – Why ELSS Is The Best Option For Tax Savings?


More and more working professionals increasingly favourELSS funds over other 80C investing options for tax savings. But what advantages do these funds provide beyond the tax advantages that make them the go-to choice for many investors?

Even though equities and debt funds are already highly well-liked, many investors, mainly working professionals, are now interested in Equity-Linked Saving Scheme funds because of their tax advantages. Today, these funds quickly replace tax-saving investments like ULIPs, PPF, NSC, and tax-saving FDs.

Benefits of ELSS Funds

Equity exposure

Most of the corpus of ELSS funds, which are hybrid equity-oriented funds, is invested in equities and equity-related goods. You may already be aware of the stock market’s potential and how it can enable you to produce outstanding long-term profits.

No other tax-saving tool under 80C offers intense equity exposure besides ELSS funds. As a result, there is a greater likelihood of wealth growth with an ELSS fund.

Shortest lock-in period

Every tax-saving option has a different lock-in term. For instance, the lock-in term for tax-saving FDs is five years, that for PPF is fifteen, and that for NSC is five. The ELSS funds have a 3-year lock-in period, which is the shortest.

While this implies that you can withdraw your money after three years, staying invested for as long as possible is typically advised to maximise your chances of long-term capital growth.

SIP Option

Most well-liked 80C tax-saving choices demand that you make a one-time investment. But with ELSS funds, you can start your investment with as little as Rs. 500 each month using the SIP option.

You could invest a maximum of Rs. 1.5 lakhs in ELSS funds to receive the 80C tax benefit in a fiscal year. Therefore, you can divide this cash into a 12-month SIP of Rs. 12,500 to receive the tax benefit without making a one-time investment.

Three-year lock-in period

The minimum lock-in time of three years is one of the essential components of an ELSS programme. ELSS has one of the shortest lock-in periods among other Section 80C tax-saving strategies.

Tax deduction

A tax deduction of up to Rs. 1,50,000 per year may be claimed for investments in ELSS under Section 80C of the Income Tax Act of 1961.

No upper limit

The maximum amount that may be invested each year is stated for several tax-saving investment opportunities. ELSS has no upper limit, although you cannot deduct more than Rs. 1,50,000 in taxes.

Is ELSS Funds Better For Tax Savings?

Funds from ELSS are more tax-effective. You could save tax even though you invest your extra money for the future since the amount you invest is deducted from your taxable income.

The lock-in time might be the lone drawback, but even this might be advantageous when you look at the wider picture. This is due to the fact that ELSS funds have the lowest lock-in period of any investment that qualifies for advantages under Section 80C of the Income Tax Act of 1961. Compared to most other tax-saving investing options, they have the potential to offer larger returns.

Difference Between ELSS and other 80C investments

A mutual fund is a type of investment that collects money from several participants and then invests that sum in various assets. These assets could be gold, gold-backed securities, equity shares, or other similar choices.

A type of mutual fund is an ELSS or equity-linked savings scheme. It assigns the remaining portion of the corpus—at least 65%—debt instruments and other assets. The primary distinction between an ELSS fund and a standard mutual fund is that an ELSS fund offers you tax benefits.

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