A Comparative Study of ELSS

8/6/2019 A Comparative Study of ELSS

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A Comparative Study Of ELSS and TraditionalInvestments Options:-

ELSS is an Equity Linked Savings Scheme. ELSS as thename clearly suggests is a savings scheme linked to equitymarkets. It is a type of mutual fund which additionally offers taxbenefits to the investors.

Equity linked saving schemes is a kind of mutual funds likediversified equity funds with Tax benefits. It is just like other taxsaving instruments like NSC and Public Provident Fund. Mainadvantage with ELSS is lock-in period is only 3 years while forNSC it is 6 years and for PPF it is 15 years. At the same riskfactor is high in ELSS.

As per Income Tax act 80c investment up to Rs 1, 20, 000 is

eligible for deduction from the gross total income hence reducingthe total taxable income. For example if your total annual incomeis Rs. 5,80,000 and you invest Rs 1,20,000 in ELSS then yourtaxable income will become Rs. 4,60,000, so that you can reducethe tax liability from 20% to 10%. Instead of paying 50,000 you

just have to pay 30,000 here you are saving Rs.20, 000.

Previously there was an upper limit for investing in tax

saving instruments like ELSS of 5, 00,000. Only individuals withless than 5, 00,000 annual incomes are allowed to invest in taxsaving instruments. But last now any individual can invest inELSS irrespective of their income level.


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Features of ELSS It is a fund with a lock-in period of 3 years. It offers tax benefit to the investors under section 80c of the

income tax Act up to a maximum limit of 1.2 Lac per annum. Investment has to be for long term only any expectation of

short term gains is not appropriate. Involves a little bit of risk because of equity allocation. It helps an investor savings by offering systematic

investment option. Beneficial to salaried people.

Comparison of ELSS with Traditional Investment Options

a) Fixed Deposits VS ELSSTax-saving fixed deposits are conventional fixed deposits

offered by banks.

Point Of Comparison

FD ELSS

Minimum SumInvested

Rs 100/- Rs 500/-

Offered Mainly by Banks Mutualfund companies

Returns 7%-9% p.a 15%- 30%

Receipts of Returns On Maturity Depends onperformance

Lock in period 5yrs 3yrs


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ELSS VS Public Provident Fund:-

Public Provident Fund (PPF) is a statutory scheme of theCentral Government of India. Deposits in PPF qualify for rebateunder section 80-C of Income Tax Act. The interest on deposits istax free.

Point Of Comparison PPF ELSS

Returns 8% Variable (15%-30%)

Interest receipt On maturity Depends onperformance

Tax Benefit u/s 80c (per yr) Rs 70000 Rs 120000

Risk level Low High


ELSS VS NSC:-

National Savings Certificates (NSC) is a certificate issued byDepartment of post, Government of India and is available at allpost office counters in the country. It is a long term safe savingsoption for the investor. The scheme combines growth in moneywith reductions in tax liability as per the provisions of the IncomeTax Act, 1961.


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Point Of Comparison NSC ELSS

Rate of Return 8% Variable (15%-30%)


Min. investment Rs 100 Rs 500

Tax Benefit u/s 80c (per yr) Rs 120000 Rs 120000

Risk level Low High

ELSS VS ULIP:-

ULIP or Unit Linked Insurance Plan is primarily an insuranceproduct as is evident from its name itself. It offers you the optionto invest your money in debt, equity or mixture of debt and equityfunds.

Point Of Comparison ULIP ELSS

Lock in period 3yrs 3yrsTax benefits Rs 120000 RS 120000

Charges High(30-35% ) Low (2-2.5%)

A Comparative Study of ELSS

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