Equity Linked Saving Schemes (ELSS) are mutual funds schemes that invest 65% in equity related instruments that are notified to avail tax benefits. Investment in such ELSS Mutual Funds would provide tax benefit to investors under section 80C.
Benefits of ELSS :
1. ELSS mutual funds come with lock-in period of 3 years. You are forced to keep your investment for a minimum of 3 years. This would help you to grow your money that considers market fluctuations.
2. By investment in ELSS mutual funds, you are eligible for tax exemption up to Rs 1 Lakh under section 80C. If you have not utilized 80C fully, this is a good opportunity to invest in ELSS funds.
3. ELSS mutual funds invest in equity related instruments, these schemes would help you to grow your money when the stock market grows over a period of time.
4. There are no other investments which would save you tax other than ELSS and PPF. The other investments like Tax Saving Bank FD, Tax saving Post office TD scheme etc. All these tax saving option returns are taxable based on individual tax slab. The interest in Public Provident Fund is tax free, but that comes with a 15 year lock-in period.The only tax saving investment option that provides tax free returns for short period is ELSS Mutual funds. ELSS mutual funds invest in equity related instruments, these are classified under equity funds. Any returns received from equity funds after 1 year is tax free, hence ELSS funds which comes with a 3 year lock-in period, dividends/returns/capital gains from such funds are also tax free.
Risks in investing in ELSS
These funds invest 65% in equity, there is some element of risk. Moderate risk and High risk investors can consider this as a tax saving investment option. Also the past performance may or may not repeat in future. Hence investors should consider this risk element and consider investing in such funds.
1. ELSS mutual funds come with lock-in period of 3 years. You are forced to keep your investment for a minimum of 3 years. This would help you to grow your money that considers market fluctuations.
2. By investment in ELSS mutual funds, you are eligible for tax exemption up to Rs 1 Lakh under section 80C. If you have not utilized 80C fully, this is a good opportunity to invest in ELSS funds.
3. ELSS mutual funds invest in equity related instruments, these schemes would help you to grow your money when the stock market grows over a period of time.
4. There are no other investments which would save you tax other than ELSS and PPF. The other investments like Tax Saving Bank FD, Tax saving Post office TD scheme etc. All these tax saving option returns are taxable based on individual tax slab. The interest in Public Provident Fund is tax free, but that comes with a 15 year lock-in period.The only tax saving investment option that provides tax free returns for short period is ELSS Mutual funds. ELSS mutual funds invest in equity related instruments, these are classified under equity funds. Any returns received from equity funds after 1 year is tax free, hence ELSS funds which comes with a 3 year lock-in period, dividends/returns/capital gains from such funds are also tax free.
Risks in investing in ELSS
These funds invest 65% in equity, there is some element of risk. Moderate risk and High risk investors can consider this as a tax saving investment option. Also the past performance may or may not repeat in future. Hence investors should consider this risk element and consider investing in such funds.
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