Equity Linked Saving Schemes are a good bet for investors looking to make returns and save tax. It has several advantages of the more traditional tax saving instruments.
Here are a few advantages of investing in ELSS
1. A shorter lock-in period
ELSS has a very short lock-in period and the only instrument that offers tax saving and has a lock-in period of only 3-years. If you look at all the other tax saving instruments, they tend to have a lock-in period of 5 years, including the likes of ULIPs, PPF, bank tax saving instruments etc.
2. The returns can be superior
The returns in the case of an ELSS can be far superior than other instruments, given that theu tend to invest in equities. However, here we much emphasize that there is an element of risk as well that may exist, as is the case when investing in equities.
3. Tax benefit under SEC80C
Investors can even invest a large amount under this section, however, the tax break is available only up to an investment of Rs 1.5 lakhs.
While the ELSS comes with some advantages as highlighted above, one needs to be cautious and select good ELSS schemes that have a great track record. So be selective before investing.