Lal Family and Tax Saving- ELSS or PPF?

ELSS funds are those tax saving Mutual Funds which by most measure is uniquely advantageous compared to the other allowable investment options for mainly two reasons. Firstly, ELSS Mutual funds are the best viable tax-saving investment option within the Rs 1.5 lakh limit that brings the benefits of equity returns and secondly there's no other three-year lock-in product like ELSS that can be compared to other tax saving financial products.

Anand Lal, 45, lives with his cousin Sachin in Mumbai. Anand Lal is an IT Consultant and earns around Rs. 15 lakhs p.a. While his cousin Sachin, 35, is currently working with a private firm earning Rupees 12 Lakh a year. Both brothers are aware of tax saving through deductions under 80C. And both of them manage their own finances.

Anand Lal has been saving tax under 80C by investing only in the traditional investment avenue viz. PPF. Anand Lal has always been a conservative investor and a regular investor of PPF or Public Provident Fund. He always made sure he invests a particular amount of money every month. Anand Lal has been investing in PPF for 15 years before finally redeeming all his money this January.

Anand Lal never felt the need of a Financial Advisor. He has been practicing the same advice which was given by his advocate father 20 years ago! He has never been a spendthrift and has always made sure that he pours all his savings in traditional investment options especially PPF. Anand Lal only trusts traditional investment options which are backed by the Government.

Now looking at his cousin, Sachin has been working in the private sector and investing in ELSS from the last 15 Years. He had been investing Rupees 12,500 a month via SIP mode since his age of 20. Sachin believes in professional Investment advice. Additionally, he has no time to understand the current markets or track his investments. Sachin never takes a financial investment decision without consulting a professional investment advisor from LAKSHMISHREE.

15 year ago he consulted LAKSHMISHREE for saving tax. Sachin also wanted to save for buying a new house apart from saving tax. LAKSHMISHREE’s financial advisors advised him to invest in an ELSS scheme after understanding his financial goals, risk appetite and time horizon. They advised him to start an SIP of Rupees 12,500 in an ELSS fund ‘X’.

As on January 31st 2019 the total amount invested by Sachin in 15 Years were 18,00,000 in ELSS while his elder brother Anand invested an amount equal to 22.5 lakhs in 15 years in PPF.

Can you guess, who earned more returns?

The answer is Sachin who invested in ELSS on advice of LAKSHMISHREE. Sachin build whopping amount equal to 77 Lakhs, while his brother could build only 44 Lakh. Now with the returns perspective, Sachin’s profit was was way higher as compared to his brother who invested in PPF.

Note that Sachin investment decisions were influenced by a professional investment advisor from LAKSHMISHREE while Anand Lal made his own financial decision. He never believed in a professional advice or ELSS as a tax saving financial instrument.

The moral of the story is never skip the advice of Professional Advice of a Financial Advisor. So, if you are planning to invest your investable corpus judiciously for tax efficiency and capital appreciation, do not forget to take the advice of LAKSHMISHREE Financial Advisor.