ELSS vs. other investments for saving tax under Section 80C

The full form of ELSS is Equity Linked Saving Schemes and these schemes are a more efficient way to save taxes than many other investment instruments available under the Income Tax Act, 1961 and Section 80C. This article will help you to understand ELSS investments and the advantages in comparison to other investment options.

If you want to invest while saving taxes then the ELSS Tax Saving option is one of the best choices for you. These funds are managed by fund managers who are highly qualified and experienced professionals. You will be able to save taxes up to 1.5 lakh rupees but if the amount of investment exceeds 1.5 lakh then you will not be able to save any taxes according to the Income Tax Act, 1961 (Section 80C).

The two types of ELSS Tax Saving options are Growth Fund and Dividend Payout. If you are searching for a long term investment then Growth Fund is for you where you will be able to realize the value of the fund at the time of redemption. On the other hand, the Dividend Payout has two types of categories, one is Dividend Payout and the other one is Dividend Reinvestment. If you choose the Dividend Payout option then you will get tax free dividends and if you choose Dividend Reinvestment then your tax free dividends will be reinvested for higher returns.

If you want an investment which will offer you higher returns and also will save tax, then ELSS is one of the best options indeed. There are many tax saving options available in the market, such as ULIPs, PPF, etc. However, ELSS is a better choice according to several experts because if you invest through ELSS you will get higher returns on the investment. Experts say that ELSS generates a return of 12% over ten years and more while a PPF generates 8% returns at best.

If you invest through ELSS then the minimum time duration of investment is for three years but if you invest through other investments like PPF, EPF and NSC then the tenure will be longer in comparison.

The ELSS Tax Saving option is so flexible that you can move to any other fund as well. ULIP schemes also offer this flexibility but you will be able to move to other funds that are offered by that ULIP. If you are not satisfied with the performance of your current ELSS fund, you can shift to another one at any time.

You can combine your PPF with ELSS and this combination is a very good strategy to get higher and more secure returns. If you combine these two investment options, then you will get the option to get a higher return through equities and you will also get the safety of government-backed securities.

Know about all the aspects of ELSS investments before you sign on the dotted line. You can also consult an expert who will tell you about all the advantages of this investment and you can tailor the same according to your financial goals.