A quick analysis of popular 80C options

We are almost halfway into the financial year, and while you should ideally plan your tax saving investments at the beginning of the year, starting now would be a smarter move than waiting till March 2020. This will allow you to already start earning returns, and in the case of ELSS funds, to benefit from the SIP (systematic investment plan) route. If you are looking for an overview of all the popular 80C options, here it is. Equity-linked savings scheme (ELSS) Equity-linked savings schemes are specially notified tax-saving schemes from mutual funds which carry a three-year lock-in and are eligible for 80C benefits. Unlike other SEBI-approved categories of equity funds, ELSS funds are allowed to be managed as go-anywhere and do-anything funds. The flexible mandate makes the multi-cap ELSS a good choice for an investor's core portfolio. Pros Cons Open-end structure As with all equity investments, they carry risks to capital Monthly portfolio disclosures (making it among the most transparent of 80C options) Depends on stock-market performance during the holding period for reasonable returns at the end of 3 years. Mark-to-market daily NAV SIP investments in ELSS extend the lock-in period as each instalment needs to complete the three-year lock-in. Employees Provident Fund (EPF) If you are salaried, every month 12 per cent of your basic pay plus DA (dearness allowance, if any) is deducted towards your EPF contribution, which can be withdrawn as a lump sum at retirement. You can also voluntarily step up this contribution to a limit of 100 per cent of your basic salary plus DA. Pros Cons High fixed return with a completely tax-free status, which tends to beat most comparable fixed-income options. The EPF interest rate for FY19 has been proposed at 8.65 per cent, while the PPF offers 8 per cent. Returns are declared from year to year based on an unpredictable surplus. A part of the EPF corpus (15 per cent of the incremental corpus) is invested in the stock market via ETFs. Illiquid Puts your 80C investing on autopilot and forces you to save before you spend. Carries complicated early withdrawal rules if you want to pull out money before you retire. Public Provident Fund (PPF) Offered by India Post and the leading banks, the PPF, being a Government of India borrowing, is an ultra-safe retirement vehicle suitable for both the salaried and self-employed. Pros Cons Completely tax-free Variable returns Returns are announced by the Centre at the beginning of each quarter and apply to your entire outstanding balance. Long lock-in of 15 years. The rate for April-June 2019 is 8 per cent and beats returns fr

This article was originally published on August 23, 2019.