ELSS Funds vs Other Tax Saving Options

In this article we cover

• 1) Why are ELSS mutual funds better than other 80C investments?

• 2) ELSS mutual funds vs Public provident funds (PPF)

• 3) ELSS mutual funds vs Fixed Deposits(FD)

• 4) ELSS mutual funds vs National Savings Certificate (NSC)

• 5) ELSS mutual funds vs Unit Linked Insurance Plan (ULIP)

In addition to saving your tax outgo, ELSS mutual funds also create a sizable corpus for you in the long term. Thus ELSS mutual funds serve your dual goals and stand out from the other tax saving investment options like Fixed Deposits (FD), National Savings Certificate (NSC), etc.

Why are ELSS mutual funds better than other 80C investments?

Some 80C investment options like Public Provident Fund (PPF) and Fixed Deposits (FD) are quite popular amongst investors as they are ‘safe’.

But such investors are not aware of the fact that ELSS mutual funds offer many advantages over other 80C investment options. Let’s understand why ELSS mutual funds are the best tax saving option by comparing it with traditional, safe tax saving options.

1) ELSS mutual funds vs Public provident funds (PPF):

Public Provident Funds (PPF) offer tax benefits and safety. However, low returns and a 15 year lock-in period is a major drawback. ELSS mutual funds, on the other hand, can give you much better returns with a lock-in period of 3 years only.

2) ELSS mutual funds vs Fixed Deposits(FD):

Fixed deposit (FD) is for conservative investors who wish to gain regularised returns. However, ELSS mutual funds can give you much better returns than fixed deposits and with SIP mode of investing you can follow a disciplined investing approach. In FD, you are liable tax as per your income tax slab, however in ELSS mutual funds you only have to pay 10% LTCG tax if your capital gains exceed ₹ 1 lakh in a financial year.

3) ELSS mutual funds vs National Savings Certificate (NSC):

As per the government’s interest rate cut announcement on 31st March 2020, small savings schemes like (National Savings Certificate) NSC’s interest rate was reduced to 6.8%. With a long lock-in period and low interest rates, ELSS mutual funds are inevitably a better tax saving option than NSC.

4) ELSS mutual funds vs Unit Linked Insurance Plan (ULIP):

ULIP (Unit Linked Insurance Plan) is a complex amalgamation of investment and insurance. On the other hand, ELSS mutual funds give you better returns by investing in equity schemes and also helps you save tax.

With such prominent exposure to equity markets, ELSS mutual funds tend to give better returns than most of the other tax saving investment options. Additionally, ELSS mutual funds come with the shortest lock-in period of 3 years. It is always preferable that you choose ELSS mutual funds to invest to manage your tax efficiently and to grow your wealth.

Open a free mutual fund investment account with India’s best mutual fund distribution platform & get started with your investment in ELSS mutual funds today.