12 Aug ELSS- Equity Linked Saving Scheme
What is ELSS- Equity Linked Saving Scheme?
An Equity Linked Savings Scheme (ELSS) is an open-ended Equity Mutual Fund that doesn’t just help you save tax, but also gives you an opportunity to grow your money. It qualifies for tax exemptions under section (u/s) 80C of the Indian Income Tax Act.
What are the Features of ELSS Mutual Funds?
- ELSS funds invest a large percentage of their portfolio in equity.
- They have a compulsory lock-in period of 3 years, which is the shortest amongst all tax saving instruments.
- You enjoy the dual benefits of capital appreciation from investments in equity along with tax-saving
- You can opt for dividend pay-outs if you wish to receive regular income or go with the growth option for capital appreciation
- ELSS Mutual Funds do not have any entry or exit load.
- 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.
How to invest in ELSS
- You can invest in ELSS the same way that you invest in any Mutual Fund.
- You can invest either as a lump sum or via the SIP (systematic investment plan) route.
- SIP ensures regularity and discipline and reduces the risk to capital
- You can invest as little as INR 500 in an ELSS fund
- While you can claim tax benefit only up to INR 1.5 lakh, you are free to invest as much as you like.
Example of Returns in ELSS.