Last-minute tax-saving idea for FY25: Can ELSS mutual funds still be a good fit into your portfolio?
ELSS) mutual funds stand out among other tax-saving instruments under Section 80C due to their unique combination of equity exposure, a short lock-in period, and potential for high returns.
“Unlike the Public Provident Fund (PPF), which has a 15-year lock-in and offers fixed returns (currently around 7%-8%), ELSS funds have a much shorter lock-in of just 3 years and historically deliver average annualized returns of 10%-12%, higher in some cases,” said Adhil Shetty, CEO of Bankbazaar.com.
“Since ELSS returns are market-linked and volatile in the short term, investing through SIP is wise. SIPs help mitigate market timing risk by averaging purchase costs during market highs and lows,” he added.
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The investment options available under Section 80C are ELSS funds, NPS, ULIP, PPF, EPF, FD, SSY, and NSC. The ELSS schemes have a lock-in period of three years, whereas any other options available under Section 80C have a longer lock-in period.
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An NPS subscriber can select multiple asset classes under a single pension fund manager. Up to 50 years of age, the maximum permitted equity investment is 75% of the total asset allocation. For those 51 years and above, the maximum permitted equity investment differs, according to a document on NPS available on the NPS Trust website.
“Compared to the National
