ELSS Vs Bank Deposits

Equity-linked saving schemes(ELSS)

Equity-linked saving schemes are one of the  Investment option in Mutual Fund,its eligible for tax benefits under Section 80C.ELSS also one of the better investment decision with Tax Benefit.

In ELSS invested Up to Rs 1 lakh in a year is eligible for deduction under Section 80C. However, unlike the life insurance policies,Unlike Insurance Policies,Investment on behalf of a minor & Tax deduction not Possible.No tax is levied when redeem investment after the lock-in period.ELSS funds have more than 65% of their corpus invested in stocks, they enjoy the exemption from tax on long-term capital gains as is the case with any other equity fund. The dividend income is also tax-free.ELSS funds have more than 65% invested in Stocks,so there is no guarantee on returns.

Lock-in period

Three Years is the Lock in Period in this Equity Linked savings scheme.

Minimum Investment

Minimum Investment for the ELSS fund is Rs.500.Investing People can opt SIP For this scheme also.People who wants invest in this fund for Tax benefit,Investments can be made in three or five instalments in a Financial year.This Instalment type of Invesment reducing the risk.ELSS can be better option than Bank Fixed Deposits.

This ELSS Scheme being a Close ended scheme,more than 80 % of Fund Assets invested in Equities,so its High Risk High Return venue of Investment.

ELSS Vs Bank Deposits

Equity linked savings schemes are yielding better returns than Tax saving Instrument like Bank Deposits .Bank deposits are risk free,but it yields lower returns than Equity Linked Saving Schemes.But Bank Deposits returns are Fixed one,except once people opted for Floating Interest Rate.

Bank Deposits are yielding 8- 10 % per annum ,it differs from Bank to bank.Equity linked saving Schemes are yields more once Equity markets perform well.

 Over the past 20 years, most ELSS investors have made 1.5 times more than the prevailing fixed income returns delivered by debt-oriented tax-saving avenues.

Due to lock in nature of the ELSS fund makes more risky because if market in downturn also,people has a compulsion to continue their fund Holdings.

Higher rate of Interest Rate being offered by some Private Banks like City Union bank & Tamilnadu Mercantile bank.In City Union bank offers 10% pa returns for 400 Days Fixed Deposits.Tamilnadu Mercantile bank Offers 9.75 % pa for 400 days Term Fixed Deposits.