When it comes to investments made for the purpose of tax savings under Section 80C of Income Tax Act, Public Provident Fund (PPF), Life Insurance premiums and Equity Linked Savings Schemes (ELSS) are among the most popular choices, especially for young investors. However, as far as Wealth Creation is concerned, there is simply no comparison between ELSS and the rest of the 80C investment options. When we compare different investments we are influenced by personal opinions, either our own or that of others. However, objective comparison should always be based on actual data. From the following observations one can understand the Wonderfully Amazing Wealth Creation in 15 years by investing in ELSS. The term of one of the most popular tax saving investments, PPF, is 15 years. Hence it is appropriate to choose duration of 15 years when comparing ELSS with PPF. As for practical calculations we have assumed an annual investment of` 1,50,000 for the 15 years & 20 years.
Before we deep dive into the analysis, it is commonly understood that PPF is one of the best fixed income investment choices under Section 80C. The tax treatment of PPF makes the returns more attractive relative to other fixed income investments under Section 80C (like NSC, PO time deposits, tax saving fixed deposits). Even when compared to historical returns of traditional life insurance policies, PPF returns are higher.
Now the table below shows the value of the investment in PPF. The total deposit of ` 22.50 Lacs for 15 years @ 8.50% P.A. become ` 42.35 Lacs & ` 30 Lacs for 20 years becomes ` 72.56 Lacs.
The following table shows the value of investment in ELSS. The total deposit of ` 22.50 Lacs For 15 years @ 18% p.a. becomes ` 91.45 Lacs & ` 30 Lacs for 20 years @ 18% P.A. becomes ` 2.20 Crores. More the Growth-Merrier the Returns!!
|
PPF |
|
ELSS |
|
Amount Invested |
1,50,000.00 |
1,50,000.00 |
1,50,000.00 |
1,50,000.00 |
Years |
15 |
15 |
15 |
15 |
Returns |
8.50% |
18.00% |
20.00% |
22.00% |
Value ` |
42,34,840.37 |
91,44,789.91 |
1,08,05,266.18 |
1,27,78,832.02 |
|
|
|
|
|
|
|
|
|
|
Amount Invested |
1,50,000.00 |
1,50,000.00 |
1,50,000.00 |
1,50,000.00 |
Years |
20 |
20 |
20 |
20 |
Returns |
8.50% |
18.00% |
20.00% |
22.00% |
Value ` |
72,56,551.98 |
2,19,94,195.50 |
2,80,03,199.94 |
3,56,98,390.99 |
ELSS is simply the best tax saving investment option for investors under Section 80C. No other tax saving investment has the Wealth Creation potential of ELSS. ELSS should generally form a major part of the tax saving investments of the investor. Thus the above table shows how ` 1.50 Lacs p.a. delivers fantastic Wealth Creation opportunity of ` 3.57 Cr.*
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