Investing in Equity-Linked Savings Scheme (ELSS) funds can be a wise financial habit to develop, especially for those who are looking to save taxes and earn good returns. ELSS funds are mutual funds that invest in equity markets and provide tax benefits under Section 80C of the Income Tax Act. In this article, we will discuss why investing in ELSS funds should be your financial habit.

1) Tax benefits: ELSS funds offer tax benefits under Section 80C of the Income Tax Act, which allows investors to claim a deduction of up to Rs. 1.5 lakh from their taxable income. This means that if you invest Rs. 1.5 lakh in ELSS funds, you can reduce your taxable income by the same amount, resulting in lower taxes.

2) Higher returns: ELSS funds have the potential to generate higher returns than other tax-saving instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), and tax-saving fixed deposits (FDs). Historically, ELSS funds have delivered annual returns of around 12-15% over the long term, which is significantly higher than the returns offered by other tax-saving instruments.

3) Equity exposure: ELSS funds invest primarily in equity markets, which provides investors with exposure to the stock market. Equity markets have the potential to generate higher returns than other asset classes over the long term. By investing in ELSS funds, investors can benefit from the growth potential of equity markets while also saving taxes.

4) Lock-in period: ELSS funds have a lock-in period of three years, which is the lowest among all tax-saving instruments under Section 80C. This means that investors cannot redeem their investments before three years. The lock-in period ensures that investors stay invested in the fund for the long term, which is essential for generating higher returns.

5) Systematic Investment Plan (SIP): ELSS funds offer the facility of a Systematic Investment Plan (SIP), which allows investors to invest a fixed amount in the fund at regular intervals. SIPs help investors to invest regularly and avoid the temptation to time the market. Regular investing also helps in averaging out the cost of investment, leading to better returns.

In conclusion, investing in ELSS funds should be your financial habit due to the tax benefits, higher returns, equity exposure, low lock-in period, and the convenience of SIPs. However, investors should also consider their risk appetite and investment goals before investing in ELSS funds. It is advisable to consult a financial advisor before making any investment decision.