Why Elss Equity Fund Is Better Than Other Tax Saving Options?

By Author: Shreya
Total Articles: 5
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Investing for the long term implies investing for the future and building your corpus consistently, in order to ensure that you have a substantial cushion to fall back on. None of us know what the future holds for us, but we can be prepared for any unknown exigencies by working and creating a corpus that will help us in sailing through difficult times.


In this context, equity fund can help retail investors who are looking to expand their investment horizon, move to long-term investing and let their money grow with the power of compounding. There are many reasons for choosing mutual funds as your way of investing- but the primary ones would be that it offers convenience, transparency, hassle free investing and the management by expert fund managers. One equity fund that offers dual benefits and is widely popular among investors is ELSS schemes. ELSS is also known as equity linked savings scheme that helps one in saving taxes, while growing their wealth. Those who have plans of investing over 5 years or more and also ...
... to save taxes, can choose this equity fund.


Let us see why ELSS is a superior option, as compared to other tax saving schemes available in the market:


PPF or Public Provident Fund has a lock in period of 15 years. If the investor wants to withdraw money prior to that, it is possible from the fifth year but only to a limited extent. Hence, there is less flexibility and a longer lock in period here.


Traditional life insurance policies have lock in periods of 15-25 years typically which differs based on the type of policy you choose. If the investor wants a premature withdrawal in this case, surrender charges will be applicable.


ULIPs or Unit Linked Insurance Plan have a lock in period of 5 years. In case of an early withdrawal, the fund balance would be moved to a discounted policy fund. The insurer will charge a fund management fee and provide a minimum guaranteed in this case.


NSC (National Savings Certificates) and fixed deposits with banks have lock in periods of 5 years and premature withdrawal of money is strictly not allowed.


From the above references, equity fund like ELSS is the best option when it comes to having multiple investment benefits such as least lock in period (3 years only), growth of wealth, easy investing process, higher market linked returns and more. Investors must consult their financial advisor and take up the investment based on their risk appetite as well as financial goals. Other than the lock in period, ELSS also has several other benefits such as superior returns, power of compounding and the flexibility of investing through the lumpsum or SIP method. One can choose the route they wish to take, based on their cash flow position and income flow. For example, if a businessman has a substantial corpus lying around and wants to save taxes through investment, lumpsum is the ideal choice for him. On the other hand, if a salaried individuals want to grow their wealth and save taxes, he/she can invest in ELSS, using the SIP option. In this way, there is flexibility and customisation for the investor.


Equity fund is a lucrative option when it comes to patient and long-term investing. It helps one reach long term financial goals, without breaking a sweat. And, in case of ELSS, it helps to fulfil goals of saving taxes as well as perpetual growth of one’s money.