SIPs or Lump Sum in ELSS: Which Is Better 

When it comes to tax-saving investments, investors often find themselves at a crossroads between SIPs and lump sum investments in ELSS mutual funds. Lumpsum or SIP for ELSS, which is better, depends on factors like market conditions, investment discipline, and financial goals. But which approach offers better potential, and what key differences should guide your investment decision? This blog will help you make an informed choice.

What is ELSS?

ELSS (Equity Linked Savings Scheme) funds are mutual funds that majorly invest in equity and equity-related instruments. They are also known as tax-saving schemes as they offer a tax deduction of up to Rs. 1,50,000 under Section 80C of the Income Tax Act. Key features of ELSS funds are-

• Investments are diversified across market capitalisations, themes, and sectors.
• At least 80% of their corpus is invested in equity and equity-related instruments.
• No maximum tenure, but there is a mandatory three-year lock-in period.
• Tax benefits on the invested amount under Section 80C.

What is SIP Investment?

SIP lets you invest fixed amounts regularly in ELSS funds, starting from as low as Rs. 100. This approach distributes investments over time, making it easier to manage your monthly budget while also providing tax-saving benefits. For example, Anuj wants to invest in an ELSS fund, so he chooses SIP and invests Rs. 1,000 every month.

Benefits of SIP Investment

• Encourages financial discipline and a habit of saving.
• Reduces risk by spreading investments over time.
• Provides the advantage of rupee cost averaging.

What is Lumpsum Investment?

A lump sum investment means investing a large amount at once in ELSS funds. This is ideal for those who receive yearly bonuses or have saved funds that they want to invest for tax benefits. Let’s take Arjun’s example. Instead of investing Rs. 1,000 per month like in an SIP, he chooses to invest Rs. 20,000 at once.

Benefits of Lumpsum Investment

• Helps in managing market volatility effectively.
• Allows investments to grow over time with compounding benefits.
• Makes it easier to plan and budget investments regularly.

Which is better: SIP or Lumpsum in ELSS?

Investment is about choosing the right strategy for your financial journey. SIP and Lump Sum are two paths to grow your money - one through small, regular steps, and the other through a single, bold leap. The table below highlights the difference between ELSS lumpsum and SIP.

To wrap up

Whether you choose SIP or lump sum, the key is to start your ELSS investment journey with the right platform. When comparing lump sum vs SIP, which is better, consider factors like market conditions, risk tolerance, and financial goals.

To begin your investment journey, download the Tata Capital Moneyfy app or visit our website!