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ELSS Vs Tax-Free Fixed Deposit: There are three months left for the end of the financial year 2022-23. Now before March 31, 2023, all people will have to invest in such places to save tax, where by investing, not only tax liability can be reduced but also excellent returns on investment.
Where does one invest to save tax
In such a situation, there is a dilemma in front of the investors as to where to invest where the money is not locked for a long time and also gets excellent returns. Because all the schemes available to invest to save tax have a lock-in period ranging from 3 years to 15 years. Today we will do a comparison between Equity Linked Savings Scheme of Mutual Funds and 5 Year Tax Saving Fixed Deposit Scheme. Under Section 80C of Income Tax, you can get tax exemption by investing Rs 1.50 lakh annually in both tax saving instruments. However, if you want, you can invest more than this. But tax exemption will be available only on investment of Rs 1.50 lakh. Let us know how much return is available on both of these investments.
ELSS gave excellent returns in 2022
First of all, let’s talk about ELSS funds, there are some ELSS funds in 2022 which have given excellent returns to the investors. In particular, Quant Tax Plan Fund has given a return of 15.98% in 2022. HDFC TaxSaver Fund has been at the second position and this fund has given 12.86% return in 2022. Nippon India Tax Saver Fund gave a return of 9.33% while Kotak TaxSaver Fund also gave a return of 9.11%. However, there are many such funds which have also given negative returns to the investors. While the average return has been 4 per cent.
Up to 7 percent interest on FD
If you look at the interest rates of 5-year tax saving fixed deposit scheme, there is a difference in the interest rates of different banks. SBI is offering 6.25 percent interest while Axis Bank is offering 7 percent interest. DCB Bank is offering 7.25 percent interest. Senior citizens get additional interest ranging from 0.50 per cent to 1 per cent. While the returns in ELSS depend on the movements of the stock market, the returns on tax saving FD schemes are fixed.
Who has less lock period
The biggest feature of ELSS fund is that it has the lowest lock in period of only 3 years among all tax saving plans. While the Tax Saving Fixed Deposit Scheme has a lock-in period of 5 years. There has been a demand from the government many times to reduce the lock in period from 5 years to 3 years similar to ELSS to make Fixed Deposits attractive. Banks have even demanded from Finance Minister Nirmala Sitharaman to make fixed deposits up to Rs 5 lakh tax-free in this year’s budget.
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