Investors can save up to Rs 46,800* (those who are in 30% tax bracket) in Income Tax by investing in ELSS.
Low investment amount – You can invest as low as Rs 500 in ELSS.
Though ELSS returns are market linked, historical ELSS performance (10 year category average return at 8.44% - as on 26/09/2020 – Source: Advisorkhoj) show higher return potential compared to assured returns of traditional 80C investment options like Public Provident Fund PPF, National Savings Certificate NSC and Tax Saver Fixed Deposit FDs etc. Currently PPF, NSC and Tax Saver FD interest rates are 7.1%, 6.8% and 5.4 – 5.5% respectively, subject to further revisions (Source: Advisorkhoj)
Historically, equity as an asset class has usually delivered higher returns over sufficiently long investment tenures – Example - NIFTY 50 TRI CAGR return of 11.43% in the last 15 years (Source: Advisorkhoj, Data as on 26/09/20)
Further, with a lock-in period of just 3 years, ELSS is the most liquid investment option compared to other 80C investment option. However, you can stay invested as long as you want after the stipulated lock-in of 3 years.
ELSS is also more tax efficient than most 80C investment options. Long term capital gains of up to Rs 100,000 in ELSS Funds in a financial year, is tax exempt and taxed at 10% only thereafter.