Finance

ELSS vs Other 80C Investments

Who does not want tax benefits? All of us, right? They help us save up so much money, even while investing. One of the most opportunistic methods of tax deductions is Section 80C. Are you wondering whether to choose ELSS investments with tax benefits or investments that offer you the tax benefit of Section 80C? If yes, then let’s understand what is the better choice for you.

What is Section 80C?

Section 80C of the Income Tax Act will let you get tax exemptions through strategic investment. This section would let you take advantage of enhanced financial growth and also lower your tax liabilities. Through the diversification of your investment options like Life Insurance, NSC, ELSS, and much more.

You can get up to Rs. 1.5 lakhs of tax saving options through this option.

What is an ELSS Fund?

An ELSS fund is a kind of mutual fund that invests primarily in equities associated with products. It is also known as a tax-saving fund since it qualifies for tax deduction under Section 80C. It is an open-ended fund that offers reasonable returns while also reducing the tax outgo.

Just imagine you invest through Groww ELSS tax saver fund, you will still make the Section 80C tax benefits. However, there are other schemes with the same tax benefit too. ELSS are a great tax-saving investment, but isn’t it just beneficial to know and compare them all before you can start investing?

ELSS vs Other 80C Investments

Understanding ELSS Funds

First, let us understand the basics of ELSS investments.

ELSS funds have a mandatory lock-in period of three years. This makes them the shortest tax-saving investment option through Section 80C. In the long run, you can also generate great returns in the range of 10% to 12%.

ELSS also comes with risks typical of equity investments. You could claim a tax deduction that could typically reach Rs. 1,50,000 in a year.

You could easily start investing in the form of a fund with even as little as Rs. 500 when you opt for a SIP. It is a good option for long-term investors.

Irrespective of the high risks and limited liquidity, it can be a beneficial investment choice because of the returns and tax benefits.

Other Investment Options with 80C Tax-Benefits

  1. Life Insurance Policies

Life insurance is a crucial element of financial planning. After the COVID-19 pandemic, a life insurance plan is worth 10x your annual income. Adding to that, it also comes with tax benefits. If you hold a life insurance plan, you could also claim a tax deduction of up to Rs. 1.5 lakhs under the Section 80C of the Act.

  1. Residential Property Investment

New home buyers could claim stamp duty and registration charges under this Section, and if you bought through a home loan, the part of your EMI that pays towards the principal is also tax deductible.

  1. Health Insurance Policies

You could also claim tax deductions on health insurance premiums paid on behalf of the parent, even when they are not dependents. Expenses that are not related to health check-ups for senior citizens who are more than 80 years old will also be tax-exempt. If you are a senior citizen yourself, you could claim deductions of up to Rs. 1 lakh for health check-up expenses.

  1. ULIP

Investing in Unit Linked Insurance Plans (ULIPs) also provides tax benefits. However, if you pay a total of Rs. 2.5 lakh in premiums for two or more distinct policies, you would be required to pay tax at maturity. However, the regulation only applies to new ULIPs acquired after February 1, 2021.

  1. Provident Funds

The Public Provident Fund (PPF) is a popular investment choice in the country. This is because it provides several advantages, including consistent earnings, a high level of safety, cheap maintenance expenses, and even tax breaks.

PPF is both a savings vehicle and a tax-saving investment alternative. Deposits made in a PPF account are eligible for a deduction of up to INR 1.5 lakh under Section 80C. You can also claim the same INR 1.5 lakh tax advantage under Section 80C by making an Employee Provident Fund (EPF) payment. Interest on EPF contributions of up to Rs 5 lakh is now tax-free.

  1. NPS (National Pension Scheme)

If you have invested in the National Pension Scheme for your retirement, you can claim tax breaks under Section 80CCD. This arrangement allows for a total deduction of Rs 2 lakh. You can deduct both your own and your employer’s contributions from your taxes.

ELSS vs Other 80C Investments

Now that you know the difference between ELSS funds and other investments that have the same tax benefit, it is your financial goals that decide the best choice for you.

Eligibility to Avail the Section 80C Benefit

Section 80c of the Income Tax Act applies to individuals and Hindu Undivided Families (HUFs). Furthermore, this part applies to both Indian residents and NRIs. Partnerships, corporations, and other legal entities, on the other hand, are not eligible for the 80C investment tax deduction.

To claim tax deductions under this clause, you must file an income tax return by July 31st. To maximise the benefits of 80c investing alternatives, file your income taxes on time.

Conclusion

If you are thinking about when you can claim the Section 80C tax deduction, you can do so while filing your income tax returns. You can easily save up to Rs. 1.5 lakhs with just some good investments. Whether it is ELSS or another form of investment that offers you the benefit of Section 80C, just make sure you utilise it to your benefit.

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