Mutual Funds offer tax saving schemes under the name of ELSS. These schemes offer exemption up to Rs 1,50,000 under Section 80C.
Advantages:Compared to other tax saving instruments, ELSS Schemes have a lock-in period of 3 years. This gives the investor a lot of flexibility to switch money to other wealth creation schemes or even utilize the money for any important tasks.
2) Higher Returns (Based on Past Performance)For the past 10 years, most ELSS schemes have given returns between 11% and 16%. Here are the returns given by some ELSS Schemes over the past 5 years.(As on 27th January 2021)
| ELSS Schemes | 5 year Return (%) |
|---|---|
| Mirae Asset Tax Saver Fund | 19.6 |
| Can Robeco Equity Tax Saver Fund | 15.75 |
| BOI AXA Tax Advantage | 15.72 |
| DSP TaxSaver Fund | 14.65 |
| Axis Long Term Equity Fund | 14.58 |
Another popular tax saving instrument is PPF. But, it is important to understand the difference in returns while investing in these instruments.
Here is a comparison between ELSS and PPF.
| Investment | Investment Period for Comparison | Investment per Annum | Investment till Date | Current Rate of Return | Value after 15 Years |
|---|---|---|---|---|---|
| PPF (Compulsory Lock-In : 15 Years) | 15 Years | 1,00,000 | Rs. 15 Lacs | 8% | Rs. 29.32 Lacs |
| ELSS (Compulsory Lock-In : 3 Years) | 15 Years | 1,00,000 | Rs. 15 Lacs | 15% | Rs. 54.71 Lacs |