When it comes to getting a tax break under Section 80C, people tend to reach for reliable options, like Public Provident Fund, National Savings Certificate, or a good old tax-saver fixed deposit. And it is no wonder, as they have been around for years and have a reputation for being easy to understand and delivering a guaranteed return.
But, over time, more and more people have begun to see ELSS (Equity Linked Savings Schemes) funds as the way to go. These funds offer a nice mix of tax perks and the potential to grow your money over the long term.
The question is simple: what sets ELSS funds apart from the rest? Here is a structured comparison to understand their advantages.
1. Shortest Lock-In Among 80C Investments
Most 80C products come with lock-ins that feel rigid.
- Public Provident Fund, PPF – 15 years are tied down
- National Savings Certificates, NSC – a 5-year wait out
- Tax Saving Fixed Deposits – you are locked in for 5 years as well
But then there are ELSS funds, which have a 3 year lock-in and that is a huge bonus, while still getting all the tax breaks you need. Also, ELSS reduces the risk of being stuck with a low-return investment for a decade or more.
2. Potential for Higher Long-Term Returns
Traditional investments give you fixed returns, and they are pretty predictable, but on the flip side, they are also pretty limited. Sure, stability is a big plus, but often the returns just aren’t going to keep up with inflation.
ELSS gets its potential from equities, which can create wealth over the long haul. And history shows that equities, over time, outperform most fixed income investments.
Having a well-managed portfolio with ELSS mutual funds can compound wealth faster than fixed-return alternatives, especially if you stick with it for more than the three-year period.
3. Diversification and Professional Management
With traditional 80C options, you are putting all your money into one place. ELSS funds, by contrast, give you a chance to spread your funds around.
With professional fund management on your side, you get the right expertise. The fund managers pick quality companies and adjust the portfolio as things change.
Many AMCs, like Samco mutual funds and more, offer ELSS funds.
4. Ease of Investment Through SIPs
One thing that really sets ELSS apart from traditional investments is how easy it is to invest. Unlike other options, like PPF or NSC, ELSS makes it possible to invest via SIPs. This means you can invest regularly.
Using SIPs is also a smart way to reduce the impact of market ups and downs. And when you combine that with compounding, it adds value to your portfolio.
Final Thoughts
ELSS funds get a couple of things right that other products just don’t – tax savings, equity growth, the shortest lock-in period around and genuinely strong long-term potential. They offer a combination of tax-saving and wealth creation.
All fixed-income instruments have their place in a portfolio, but ELSS stands out as a flexible, growth-focused and efficient way to go for modern tax planning. However, since these funds invest in equity, you need to know the risk they carry, as these funds are linked to the market,
So, understand the product, your goals, and your risk appetite before you make an investment decision for ELSS or any other investment product.
