Is it better to invest in ELSS than PPF, considering a long term horizon?

Earlier, we looked at the pros and cons of . tax-saving fixed deposits Another popular tax-saving alternative under Section 80C is mutual_funds. These tax-saving mutual funds are known as Equity Linked Savings Schemes (ELSS). ELSS funds are widely-used to save taxes but a lot of people make rushed investments in them in the last financial quarter of the month. To get the best out of tax-saving mutual funds, an investor needs to understand their pros and cons

ELSS and PPF are two completely different products. The reason one tends to compare is because the two are part of the same tax saving section of the income tax act.

PPF is similar to debt instruments. Returns from this investment is fixed and more importantly similar to the underlying inflation in the economy.

(Never fall prey for insatiability)

Its far better to invest in ELSS than in PPF or any other tax saving funds.

Here are the pros of ELSS -

Investments are in equity -

It gives you higher returns and way to participate in the growth story of India. Unless you have a lot of time to research and pick stocks, this is the best way to invest.

Shortest lock-in of 3 years - 

If the market shot up in these three years, you can withdraw the money and invest elsewhere - buying a house etc. If the markets have not performed so well during these three years, you can wait and hold longer. Unlike FD, the investments are not liquidated by itself

The returns are tax free - 

similar to PPF, the returns earned on the ELSS investments are subject to nil taxation.

It’s easy to invest, track and redeem -

with just click of buttons or touch of screens, you can invest and manage your investments. The returns are updated on a daily basis and after three years, you can withdraw whatever amount you need, keep the rest of the investments invested.

While ELSS are logically best options, here are a few factors why someone might shy away from investing in them for saving taxes -

No fixed returns - certain people want certainty, guarantee. ELSS can’t offer that as the investments are linked to market. But PPF guarantees you a 8% returns.

If I can, then I will redeem -

Since ELSS has a lock-in for just 3 years, you might use the funds just after that. Therefore, your impulse shopping or urge to spend can hurt your net worth. While in case of PPF its locked for 15 years.

Want to save money through ELSS? 

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Why insurance policies are needed in digital format

In case of health insurance policy, the sum assured needs to be Rs 5 lakh or more apart from annual premium of Rs 10,000 and above. For general insurance policies, e-insurance is needed if anyone is paying an annual premium of Rs 5000 and above or has a sum insured of Rs 10 lakh or more.

The Insurance Regulatory and Development Authority of India (IRDAI) 

It have made issuing insurance policy in electronic mode mandatory from October 1, 2016. It holds for new insurance policies based on certain criteria. The rule states that e-insurance needs to be issued to anyone paying an annual premium of Rs 10,000 and above or the sum insured is Rs 10 lakh or more.

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In case of health insurance policy

The sum assured needs to be Rs 5 lakh or more apart from annual premium of Rs 10,000 and above. For general insurance policies, e-insurance is needed if anyone is paying an annual premium of Rs 5000 and above or has a sum insured of Rs 10 lakh or more. The rule is applicable irrespective of the policies bought online for offline. There are over 30 crore life policies and 10 crore non-life policies in force and currently about 6 lakhs e-Insurance accounts have been opened, as per CAMSRep.

"E-issuance of Insurance policies has been made mandatory. It is desirable to have e-IA account to buy online policy" says an MD & CEO, Universal Sompo General Insurance. "With the government pushing all service to digital, we believe the adoption of Electronic Issuance of Policies would also improve. People who have understood the benefits of policies issued through the IR system are not asking for physical copies of insurance documents anymore. The challenge remains in educating the large population about the benefits", says a CEO, CAMS Insurance Repository.

Children Insurance,Child Rider Benefits,Why You Take Children Insurance

E-Insurance Account (eIA)

An e-Insurance Account (eIA) which is a lot like demat account helps you to keep all your electronic insurance policies from any insurer in electronic mode. Opening an e-Insurance Account (eIA) keeps your electronic policies safe, convenient and easy to manage. From general to life insurance, for all type of insurance policies one e-Insurance account is needed which comes with separate account number, login Id and password for each account holder to access their account. For existing insurance policies, one can convert their policies into electronic mode by requesting for conversion along with applying for opening an e-insurance account. While buying a new insurance policy, it is best to open an eIA at the same time and go for an electronic policy.

Ways to earn money through Fixed deposit

High volatility in the stock market coupled with falling inflation has brought back fixed deposits as an attractive investment avenue for the investors who are looking for fixed returns.

Bank FD schemes offer guaranteed returns to the investors at the time of the maturity.

A bank FD scheme is considered one of the safest investment avenues compared to other avenues of investments.

You can avail loans of up to 75-90 per cent of the FD amount.

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Here are three ways in which you can get the most out of you fixed deposit plans...

Do enough research
Before deciding on a particular FD scheme, you should look at the interest rate it is offering. You should also decide on the tenure of the scheme. FD interest rates may vary across different banks and different tenures. Interest amount on FDs are calculated quarterly, half-yearly, yearly or at the maturity. Therefore, you should calculate and compare to discover which bank is paying you the highest interest rate. Consider two banks X and Y. Bank X offers 10 per cent per year on a five-year FD and computes the interest on a quarterly basis. On the other hand, Bank Y offers the same interest rate for the same tenure but calculates the interest on a yearly basis. Here Bank X is fetching you more interest than Bank Y because it is calculating interest more frequently.

Thus, the interest that you will get at maturity depends on how frequently the interest is calculated.(Loan Against Fixed Deposit)

Split your FD

TDS (tax deductible as source) at 10 per cent is charged on fixed deposits if the interest income exceeds Rs 10,000 in a financial year. The tax liability of TDS is determined at the branch level. If you want to avoid TDS, you can split your fixed deposits, that is, instead of opening one FD account you can open FD accounts in different branches of the bank and divide the amount among these. Opening fixed deposits in different banks can also avoid TDS. Splitting your fixed deposit has another advantage. In case you need money urgently, you do not have to break all your FDs. You can withdraw the amount by breaking only one or two of them and rest of the accounts still earn you the predetermined interest.