The government has extended the last date of making investments to claim tax benefit for FY 19-20 under section 80C to June 30, 2020. This means, clients who have been postponing their tax planning until March now get an opportunity to invest in ELSS following the sharp correction in equities.
Under section 80C, investment in ELSS allows an investor to claim an exemption of up to Rs 1.50 lakh from his total income in a financial year. ELSS stands to give returns par-excellence as against the other tax vehicles available under section 80C. This is because ELSS is essentially the same as a diversified equity fund and invests at least 80% of its assets in equities across market capitalization.
Further, the current market scenario has increased the chances of ELSS beating every other investment option u/s 80C by a big margin. This is because rates for many other investment options u/s 80C like PPF, NSC, Bank FDs that offer returns currently in the range of 6-8.5% are inching lower gradually because of the rate cuts by the RBI. Meanwhile, the equity markets have corrected around 30% from its peak in January 2020 and offer a great entry point considering the attractive valuations.
If you are looking to zero-in on a fund in the ELSS space, Aditya Birla Sun Life Tax Relief 96 is a good choice. The track record of ABSL Tax Relief 96 is testimony to the fact that ELSS is one of the best capital market linked investment options, which has the potential to beat every other investment option u/s 80C with the shortest lock-in of 3 years.
For over a decade, there have been only 2 periods in which the 3-year returns have been negative. The average 3 year investment experience (for the period March 2011 to March 2020) of any investor is ~15%. The fund has outperformed most of its peers in this category as well.
Ajay Garg, Senior Fund Manager at Aditya Birla Sun Life Mutual Fund, manages this fund. Garg, who has more than 25 years of experience, also manages seven other funds.
