5 Reasons to Invest in ELSS Over Other Tax-Saving Investment Options

The first ten months of the year 2020 have already gone by. Many things changed in our lives over these ten months. We have given up on a lot of our practices and have got accustomed to leading life a whole new way. However, some things never change. Taxes belong to that category.

If you have not planned your taxes for the FY 2020-21 yet, then it’s high time that you focus on it now. In just about a couple of months, your HR is going to ask you to furnish tax-saving investment proof. If you don’t sort your taxes out by then, your employer may deduct a high TDS in the last quarter of the FY 2020-21.

Why take home a lesser salary when you can utilise the Section 80C provisions and save up to Rs 46,800 a year in taxes? Invest in ELSS (Equity-linked Savings Scheme) mutual funds and claim a tax deduction of up to Rs 1,50,000 a year. This is the best Section 80 investment option you have.

Here are 5 reasons to invest in ELSS over other tax-saving investment options:

1) Very convenient to invest
Unlike the traditional tax-saving investment options, you don’t have to visit a branch of a bank or post office to complete the formalities and invest. The documentation with respect to ELSS can be completed at the comfort of your home, and it hardly takes ten minutes.

The entire process of investing in ELSS mutual funds has been made paperless by most fund houses in the country. Thus, investing in ELSS is very convenient and hassle-free.

Also Read: 4 Things to Remember Before Investing in ELSS Funds

2) Lock-in period of only three years
ELSS mutual funds have a lock-in tenure of just three years, the shortest among all Section 80C investment options. The traditional investments PPF and bank FDs come with an extended lock-in period of 15 years and 5 years, respectively. Therefore, ELSS funds are more liquid than any other tax-saving investment option.

3) Has the potential to provide inflation-beating returns
The equity exposure of ELSS funds gives it an edge over other tax-saving investment options. ELSS is the only tax-saving investment with the potential to offer inflation and benchmark-beating returns. These funds are capable of providing returns in the range of 12% to 15% as compared to 5% to 8% of bank FDs and provident funds.

4) Get the dual benefit of wealth creation and tax deduction
Investing in ELSS mutual funds renders the dual benefit of tax deduction and wealth creation over time. The equity exposure of ELSS funds ensures that the returns are not curtailed under a particular limit. These funds provide overwhelming returns when the markets are booming. This is the only tax-saving investment option which offers this dual benefit.

5) Option to stagger your investment via a SIP
You can invest a small sum on a monthly basis through a systematic investment plan (SIP). This has alleviated the need to arrange for a lump sum to get started with your investments in ELSS. Also, you can automate your investments by giving your banker standing instructions to deposit a fixed sum from your bank account at periodic intervals, to the ELSS fund of your choice on your behalf. This makes the whole investment process a simple and straightforward one.

Saving taxes has been simple and straightforward by the fund houses. You have to spare just 10 minutes to do away with your tax-savings for the FY 2020-21. Play it smart by choosing to save taxes with ELSS mutual funds.

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in.