Tax saving u/s 80(C) – Did you lose Rs. 1.5 Crore?

In this post, I will talk about 2 Tax saving instruments u/s 80(C).One is PPF, which is a popular product. The other one is ELSS, which is less popular but more successful in terms of returns and in creating wealth for the investor.

ELSS stands for Equity Linked Savings Scheme. ELSS is a type of Mutual Fund, which is eligible for Tax saving u/s 80(C). You can invest in lumpsum at one go or monthly through SIPs (Systematic Investment Plans) in ELSS. Following are the differences between PPF & ELSS

Aspect

PPF

ELSS

Lock-in period 15 years 3 years (very less)
Returns 8.7% 26% (Franklin India Tax Shield’s return since 1999)
Risk Low Low if the investment period is more than 3-4 years
Where invested Government securities Shares of fundamentally good companies to achieve good capital growth in the long-term and to create wealth

Annualised returns of various ELSS

Scheme name 3 year 5 year 10 year Since inception
Axis Long Term Equity Fund

30%

20%

22%

Franklin India Tax Shield

24%

15% 18%

26%

ICICI Long Term Equity Fund

23%

13% 16%

23%

Birla Sunlife Tax Plan

24%

14% 15%

21%

HDFC Tax Plan

19%

9% 16%

28%

If some X person has invested Rs. 1 Lakh in PPF & in ELSS every year for Tax saving u/s 80(C) in the past 16 years (since 1999), the difference in returns and the wealth created is illustrated below.

Wealth created

Return p.a

PPF

Rs. 35 Lakh

8.7%

ELSS

Rs. 1.9 Crore

26%

Difference Rs. 1.5 Crore

17.3%

So, if someone has invested in PPF in the last 16 years and not in ELSS, he would have lost (an opportunity to create) wealth of Rs. 1.5 Crore.

It is high time that you opt for ELSS as a Tax saving strategy to save Tax+Build wealth.

Hope the post is useful and will make you think in the right direction and select the right option.

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