ELSS (Equity Linked Savings Scheme) are equity funds that invest a major part of their Corpus into equity or equity-related instruments.
It is a mutual fund investment scheme that helps you save your tax. That’s why they are also known as tax saving point schemes.
Investing in mutual funds has a dual benefit of tax deductions and wealth accumulation over time. In addition, these Mutual Funds have a lock-in period of three years, the shortest among all tax saving investments, and can offer hai returns among 80C options.
You definitely won’t believe that these Mutual Funds are eligible for tax deduction under the provision of section 80C of the Income Tax Act 1961. However, these are the only mutual funds that are eligible.
You can claim up to 150000 rebate and save 46800 yearly and taxes by investing in Equity Linked Saving Scheme, ELSS fund.
What are the features of ELSS Funds?
Here are some of the important features of ELSS Mutual Funds that you should know about before investing it:
- Bewafa tax deduction of up to rupees 150000 per year under Section 80C
- ELSS finest do have a lock-in period of three years, and there is no provision of prematurity
- You can invest in this fund as it has no upper limit, while the minimum investable amount varies according to the fund houses.
- This fund’s portfolio mostly consists of equity, whereas they have some exposure towards fixed income securities as well.
Key Reasons: Why To Invest in ELSS?
Equity shares usually care about the portfolio and are more cautious about losing money in the market. On the other hand, smart investors are interested in saving money and are interested in it for a longer time though ELSS is an ideal choice for investors who want to save tax.
It is a kind of mutual fund scheme that invests the majority of Corpus in equity and equity-related products.
Benefits For Tax
Investing in ELSS is easy, and one of the primary reasons investors would like to invest in this fund is the tax-saving scheme. ELSS is the only fund that qualifies for tax deduction under 80C of the Income Tax Act 1961.
But any dividend or long-term capital gain earned by an investor is exempted from income tax. So simply, your returns from ELSS will become Tax-Free.
You will be surprised to know that the Government of India also provides tax rebates for those who are investing in equity-linked savings schemes under section 80C.
You can invest in it and deduct up to 150000 from your total taxable income to effectively reduce the tax liability.
Investors would love to invest in long-term investments with good results.
They are not bound with the lock-in period, but in the case of ELSS, if the funds are locked for three years, which means you are obligated to stay up to three years or more to exempt yourself from the taxation system.
It forcefully embeds somehow becomes a good habit of staying in for a long term as an investor.
Ride the Long Term Value Growth
Who doesn’t want a long-term investment with good returns? The locking period for this fund is three years which allows you for the continuous growth of your fund for the long term or redeems after 3 years.
Equity investments are subject to market risk, but from these funds, invest your money in equity. You can also possess a good tax exemption.
It helps you in systematic investment with as low as rupees 500 per month. Your savings turns into your investments. It becomes a Habit for the continuous growth of sense. It has given good returns after 3 years. It locks you in a 3-year timeline that gives you more return.
And you will eventually be exempted from the taxation system. If you start an escape in an equity-linked savings scheme, the return of SIP amounts will be generated every month after three years of the first investment.
Besides that, all returns will be exempted from your taxes while filing returns.
Is Investing in ELSS a Good Idea?
Some investors use this fund for their time and long-term plan. Every investment made today in ELSS can work as an annuity for the future year.
Currently, 1 year three years, five-year average annualized growth of ELSS is nearly 54 %, 14% and 14.2 5%, respectively. Compared to other tax-saving products, ELSS funds have the highest potential to generate returns.
But, of course, the rest is everywhere. Because equity is considered a risky asset class exposed to the volatility and market situation, ELSS is quite risky.
ELSS is considered the best tax saving option with higher potential and returns for a long time compared to fixed deposit, PPF or ULIP. In addition, you may invest in expert-curated mutual fund plants that consist of top-performing ELSS.