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POSTED BY ON May 4, 2013 10:55 am COMMENTS (3)
Hi Friends
When i look at the returns from ELSS funds for last 3 years, Its not more than 7-7.5%
Banks are offering 9-9.5% for Tax Saving FDs. So am confused which one should i opt? Why should i invest in ELSS when banks are offering much higher returns?
Please help.
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Thank you Ashal and Sumith 🙂
Dear Sampath, comparing FDs & ELSS is not good for your financial health. There is a possibility in ELSS that you may erode a part of your capital & reverse possibility that you may double your money in 5Y time. Also FDs are taxable for the interest part, whereas ELSS are tax free. The risk associated with the ELSS is the beauty of the product.
To chose ELSS or not ‘ll be a personal call.
Thanks
Ashal
In Tax saver FD we get tax exemption on five-year deposits on investments up to Rs 1 lakh under section 80C although returns on these deposits are taxable, the net return depends upon the income tax bracket (10 – 30%) in which you fall and taxed accordingly.
On the other hand investment in ELSS is deductible from taxable income and the return on ELSS schemes is completely tax free. It has a 3 year lock in period which is also less compared 5 year FD.
As the allocation is done in equity – so the return depends on market volatility, but in long run the return should outperform other fix maturity plans. You can review the performance of your ELSS (after it completes lock-in period) to see if it is well performing than its benchmark and category average and move to other funds accordingly.
But if the choice is only between these 2 options – anyway I would choose ELSS undoubtedly.