Why ELSS is a better tax-saving option than traditional instruments?

Equity-linked saving schemes (ELSS) qualify for a deduction under Section 80C. You can claim a deduction of up to ₹1.5 lakh against investments made in ELSS during the financial year. Some experts also believe ELSS is a better option than traditional instruments such as public provident fund and National Savings Certificate as they have a potential to deliver better returns.

However, returns are not guaranteed and are market-linked but they have the ability to deliver inflation beating returns if one stays put for a long term. “Since we already have EPF deductions, it adds a good balance. And more importantly it teaches us how to be good equity investors, stay for long term," said Shweta Jain, chief executive officer and founder, Investment.

ELSS returns are, however, not guaranteed and are market-linked but they have the ability to deliver inflation beating returns if one stays put for a long term.

Apart from these, there are other reasons which make ELSS a better choice for tax savings.

Shortest lock-in: ELSS has the shortest lock-in of 3 years when compared to other tax saving instruments. This gives comfort to people that they may have the option to withdraw the money in case of an emergency. However, it is advisable that one satys invested in ELSS for long-term. “ELSS can deliver better returns but one should stay invested for more than just 3 years, need to stay invested for longer and definitely see better returns, also these are good habit forming decisions, so definitely one should opt," said Jain.

SIP option available: ELSS helps in building the discipline of investing in equities as one can invest systematically through SIP plus the lock-in ensures that the person stays put for long-term and doesn’t withdraw due to market movements.

As the financial year is coming to an end, many of you may be looking for investing in tax-saving options. However, it is always advisable to invest in equities in a staggered manner to get the benefit of rupee-cost averaging. So, may be you can start with your investments in ELSS now and continue it for next year in a staggered manner.

 

Disclaimer:

The views are for personal use and for educational propose only. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information.

This BLOG is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this blog. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing.