What is the ELSS Fund?

What is ELSS Funds?

As the name suggests, ELSS (equity-linked savings scheme) is an open-end mutual fund scheme that predominantly invests in equity or equity-related instruments. These funds offer a dual benefit: capital gains and tax benefits under Section 80C of the Income Tax Act 1961 of India.

The lock-in period for an ELSS fund is at least three years. In this period, you cannot make any withdrawal or redemption of the investment.

 

What are the Benefits of Investing in ELSS Funds?

Here are the key benefits of why you must invest in ELSS mutual funds as an investor and trader:

• Tax Benefits: ELSS funds provide tax exemptions up to Rs. 1,50,000 under Section 80 C of Indian income tax, hence helping you save taxes.
• Long-term Growth Potential: As equities are part of the investment portfolio, ELSS funds possess long-term capital gains qualities. In the past, equity investments have paid off better than most other products, like fixed deposits or real estate investments.
• Lower Expense Ratio: Another advantage of the ELSS funds is that they attract a lower expense ratio than other kinds of mutual fund schemes which in effect means less charges on the management to the investors.
• Professional Fund Management: ELSS is under the discretion of professional fund managers who study the market, select stocks and make investment decisions to develop the best portfolio to invest in.

 

Taxation and ELSS Funds

On redemption or withdrawal post-locking in the period you earn a profit, the income tax slab is applied to the amount earned. If you keep the ELSS fund beyond the lock-in period in your favor, you will be enjoying long-term capital gains tax, which is only 10% on gains over rs 1 lakh.

 

Which ELSS Fund Should You Invest In?

Here are the key factors you must review when selecting the right ELSS funds:

• Fund Performance: Consider the experiences regarding the fund’s overall growth with the help of the special metric over 3-5 years at least.
• Risk Profile: These are moderately high-risk mutual funds, but the returns usually are substantial.
• Asset Allocation: Check whether the fund’s asset allocation policy is suitable for you depending on your choices and objectives.

 

Conclusion

ELSS funds are a perfect investment option when it comes to saving taxes as well as growing your investment in the long haul. ELSS mutual funds help you in planned tax saving and empower you to use the stock market for a better and secured future. Start investing in ELSS funds today and lock in your future goals.