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ELSS vs Tax Saving FD - Which is the best tax saving option?

07 Nov 2016 Nutan Gupta

Equity Linked Saving Scheme (ELSS) and Tax Saving FD are both tax-saving instruments and are eligible for a tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. Listed below are some of the differences between ELSS and tax saving FD.

ELSS Tax Saving FD
Investment ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products. It is a special fixed deposit made with any bank.
Returns Not fixed, depend upon the performance of equity market. However, in the past, ELSS has given average returns of 12-14%. The interest rate varies from one bank to another. It usually ranges from 6.5-7.5%.
Tenure The minimum tenure is 3 years. One can continue investing in ELSS till anytime as per his choice. The minimum tenure is 5 years and the maximum tenure is 10 years.
Lock-in Period 3 years 5 years
Risk Factor ELSS carries some risk. However, research suggests that ELSS has given positive returns over a longer period of time. It is completely risk-free and safe as normal FD of banks
Online Option One can start an ELSS online. Though some banks offer online facility to start FD, majority of the banks do not have this facility.
Liquidity One can withdraw money from ELSS anytime after 3 years. Tax Saving FD cannot be withdrawn before 5 years.

Conclusion
Thought the performance of ELSS depends on equity markets and there is some amount of risk attached to it, it has the potential to give double the returns than tax saving FD in a matter of three years. Individuals who are willing to take some risk can look to invest in ELSS.

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ELSS vs Tax Saving FD - Which is the best tax saving option?

07 Nov 2016 Nutan Gupta

Equity Linked Saving Scheme (ELSS) and Tax Saving FD are both tax-saving instruments and are eligible for a tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. Listed below are some of the differences between ELSS and tax saving FD.

ELSS Tax Saving FD
Investment ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products. It is a special fixed deposit made with any bank.
Returns Not fixed, depend upon the performance of equity market. However, in the past, ELSS has given average returns of 12-14%. The interest rate varies from one bank to another. It usually ranges from 6.5-7.5%.
Tenure The minimum tenure is 3 years. One can continue investing in ELSS till anytime as per his choice. The minimum tenure is 5 years and the maximum tenure is 10 years.
Lock-in Period 3 years 5 years
Risk Factor ELSS carries some risk. However, research suggests that ELSS has given positive returns over a longer period of time. It is completely risk-free and safe as normal FD of banks
Online Option One can start an ELSS online. Though some banks offer online facility to start FD, majority of the banks do not have this facility.
Liquidity One can withdraw money from ELSS anytime after 3 years. Tax Saving FD cannot be withdrawn before 5 years.

Conclusion
Thought the performance of ELSS depends on equity markets and there is some amount of risk attached to it, it has the potential to give double the returns than tax saving FD in a matter of three years. Individuals who are willing to take some risk can look to invest in ELSS.