Comparison of different Tax Saving Investments- ELSS versus PPF

By Rahul Pithadia : The below chart shows detailed information about the returns generated in a span of 20 years by ELSS (Equity linked saving scheme) compared to the returns generated by PPF (Public Provident Fund). Returns itself suggests which one is more fruitful However investments must be made depending upon the Risk Bearing Ability of an individual. ELSS carry high risk as it is equity oriented and on the other hand PPF is a safe investment.

elss 2016020116

ELSS funds have the lowest Lock-in-Period amongst all the categories of Section 80C which is 3 years and investors qualify for tax benefits under section 80C of Income Tax Act, 1961. This is the reason we have included this Tax relief fund.

Birla Sun Life Tax Relief 96 – Growth Weekly Chart

birla sunlife tax relief 96 2016020116

Birla Sun Life Tax Relief 96 is an open ended Equity Linked Saving Scheme (ELSS) with 99.77% exposure to equity.

Portfolio Analysis: The fund aims to generate returns by investing in complete equity with maximum exposure to Banking/Finance and Automotive sector. The fund has diversified its holdings into 50 stocks with 26.38% concentration into top 5 stock holdings which is shown below:

Sector Allocation (Jan 25, 16)

sector allocation 201602116

Risk Profile: This fund is considered as “High Risk Fund” due to complete exposure to equity instruments, therefore it’s suitable for investors who are looking for Tax benefits.

Taxation Perspective: Birla Sun Life Tax Relief 96 is ELSS fund is where investor is eligible for tax exemptions up to 150,000 INR under section (u/s) 80C of the Indian Income Tax Act, 1961 if they stay invested for three years or more. ELSS Funds are also eligible for Long Term Capital Gains which will be treated tax free as the holding will be more than one year. The Dividend earned from ELSS funds is also treated as tax free.

Investment Rationale: Birla Sun Life Tax Relief 96 fund has shown some underperformance as currently Equity market is going through consolidation in the form of sideways to negative action. We can expect the same in this fund to continue for next few weeks hence but once the correction is complete next strong bulltrend should start. To benefit from it one can start investing in this fund with benefit of tax as well!

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