 "Three 80C investments that still make sense for you under new tax regime")
With the government promoting a new tax regime that features lower tax rates but eliminates popular exemptions like Section 80C, many taxpayers are reassessing their investment strategies. Recent government data reveals that about 72% of tax filers have already made the switch to the new regime. This shift signals a change in mindset, moving away from the earlier rush to find ideal tax-saving investments. However, it's important to recognize that certain investments previously associated with Section 80C still offer significant financial advantages, even without the tax breaks. Value Research explores three key options that can strengthen your investment portfolio.
Equity Linked Saving Schemes (ELSS): The Three-Year Lock That Unlocks Smart Investing
For new investors, navigating the equity market can be daunting due to its inherent volatility. Yet, investing in Equity Linked Saving Schemes (ELSS) remains a smart choice. While the primary appeal of ELSS has been its tax benefits under Section 80C, it also offers substantial growth potential.
ELSS funds are mutual funds that invest primarily in equities and come with a mandatory lock-in period of three years. This means that while your investment is locked away for a short term, it can benefit from the long-term growth of the stock market. Historically, equity markets have delivered higher returns over extended periods compared to other asset classes. Thus, even without the tax exemption, ELSS can help build wealth over time.
Why it belongs in your portfolio, according to Value Research
- Encourages long-term investing by preventing impulsive redemptions.
- Provides market-linked returns with exposure across sectors and market caps.
- An average ELSS fund has returned over 13 per cent in the last 10 years
2. Public Provident Fund (PPF): A Secure Long-Term Investment
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Another investment that continues to provide value is the Public Provident Fund (PPF). While it is primarily known for its tax benefits, the PPF's appeal lies in its safety and guaranteed returns. PPF is a government-backed savings scheme that offers attractive interest rates and allows investors to build a substantial corpus over 15 years.
The PPF is an excellent option for risk-averse investors looking for a secure, long-term investment avenue. The interest earned is compounded annually, and while you won't receive a tax deduction under the new regime, the returns are still attractive and risk-free. The PPF can serve as a cornerstone of your financial strategy, ensuring stability and security in your portfolio.
Why it still belongs in your portfolio
- Safe and stable: Government-backed returns with no market risk.
- Tax-free earnings: Interest earned remains tax-free.
- Long-term stability: An ideal choice for long-term fixed-income allocation of your portfolio
3. National Pension System (NPS): Planning for Retirement
The National Pension System (NPS) is another valuable investment that stands strong even without the 80C tax benefit. Designed to help individuals save for retirement, the NPS offers a mix of equity, corporate bonds, and government securities, allowing investors to choose their asset allocation.
Investing in the NPS not only helps build a retirement corpus but also provides additional tax benefits under different sections. While the new tax regime may not include the direct 80C benefits, the long-term growth potential and retirement planning aspect of the NPS make it a worthwhile consideration for any investor.
Why it should stay in your portfolio, as per Value Research:
- Built-in retirement discipline with strict withdrawal restrictions.
- Balanced equity-debt allocation
- Employer contributions (up to 14 per cent of basic salary) still get tax benefits under the new regime.
Value Research compares the three options:
Key Takeaways
- ELSS offers high returns with a shorter lock-in period, making it ideal for investors looking to capitalize on market growth while still being committed to a disciplined investment approach.
- NPS promotes long-term retirement savings, providing a balanced growth opportunity while ensuring that funds remain relatively inaccessible until retirement, fostering disciplined saving habits.
- PPF stands out for its stability and government backing, delivering tax-free returns and encouraging long-term saving habits over a significant period.