An Equity Linked Saving Scheme is a diversified equity mutual fund that gives you the dual benefit of tax savings with the growth potential of equities. The Income Tax Act, under section 80c, allows taxpayers to invest up to INR 1.5 lakh in ELSS and claim it as a deduction from their taxable income. There are two ways to invest in ELSS, 1. Systematic Investment Plan (SIP) 2. Lump sum. ELSS could be the ideal option to help beat rising inflation in the long term and help grow your money.
Tax saving is one important part of our financial career, managing tax efficiently is an art. When it comes to saving taxes most of us wait till the month of March because we continue our habits to push everything to the last day but this time due to Covid-19 pandemic the government has extended the last date for tax saving for FY2019-20 from March 31, 2020 to June 30, 2020. So those who had not done Tax saving till now can do investment till June end.
Features of ELSS Mutual Funds
- Dual benefits (Wealth Creation & Tax Saving)
- ELSS funds invest a large percentage of their portfolio in equity.
- ELSS Mutual Funds do not have any entry or exit load.
- Shortest lock-in of 3 years
- Minimum investment of Rs 500/
- Dividend and growth option
Advantages of ELSS Mutual Fund
- LTCG exempt up to Rs 1,00,000/-
- You enjoy the dual benefits of capital appreciation from investments in equity along with tax-saving.
- Good ELSS Funds generate returns in the range of 10-12 per cent in the long run, among the highest in the tax-saving category of instruments. However, ELSS also comes with some risk, inherent in equity investments.
- SIP in ELSS ensures regularity and discipline and reduces the risk to capital.
- Rupee-cost-averaging and compounding.
- Highly liquid investment option
ELSS comparison with other Tax Saving Instrument
|Name of the Instrutment||Lock in period||Returns||Tax on Returns|
|ELSS||5 years||(10-12%) subject to market risk||LTCG Tax ( Above one Lakh)|
|Tax-Saving FD||5 years||(6-7%)||Income tax|
|National Saving Certificate (NSC)||5 years||(7-8%)||Income tax|
|Public Provident Fund (PPF)||5 years||(7-8%)||NO|
|National Pension System (NPS)||5 years||(8-10%)||Partially Taxable|
ELSS funds are far better than other tax saving instruments, with the lowest lock-in period (3 years) and better returns. They are also tax-efficient.
Risk in ELSS
- Returns in ELSS are market linked.
- The returns are not guaranteed, any investment in mutual fund doesn’t guarantee returns.
Looking for a Investment in ELSS Mutual Funds write us at [email protected]
Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.