All About Tax Saving Mutual Funds

You can save tax with ELSS Mutual Funds.

You can generate a lot of wealth through various schemes, including Fixed Deposit, PPF, and many others. These schemes may result in you having to pay taxes on the returns. To overcome this obstacle, the ELSS investment option was created.

Let’s find out more about ELSS Fund.

ELSS mutual funds are also known as Equity Linked Saving Schemes. They have high returns and a different tax system.

Features of ELSS Mutual Funds

  • These returns are non-taxable until 31 March 2018. If the profit earned exceeds Rs 1 lakh, tax on returns is at 10%
  • Another advantage of ELSS mutual fund is that they have a 3-year lock-in period. This means that you can’t sell or redeem units for three years from the date these funds were purchased. You can redeem, sell, or switch units at any time after 3 years.
  • The tax saving mutual funds allow an individual or HUF to take deductions up to Rs. 1.5 lacs of the total income. This is covered under Sec 80C Income Tax Act 1961. If someone invests Rs.50,000, this is an example. The tax benefit will be passed on to the taxpayer, and the tax burden will eventually decrease.
  • These funds offer growth and dividend options.
  • An investor can also choose to invest via SIP, or a one-time investment known as a lump sum. It is up to the investor what works best for them. One can overcome market volatility by investing using SIP in ELSS mutual fund.
  • ELSS mutual funds have no maximum limit. This means that investors can choose to invest as much or as little as they want, depending on their risk tolerance and ability to earn high returns.
  • The investment in this fund is secured for three years. You cannot return the amount even if the market is not favorable. This allows for less capital outflow and causes panic among investors during bearish times. This ultimately increases capital growth chances.
  • ELSS mutual funds are primarily a portfolio of stocks. They are designed to provide long-term investment gains. This is achieved by diversifying portfolios among various types of companies and sectors.

Before investing in ELSS Mutual Funds, there are some things you should remember.

  • For the best selection of the right fund, it is important to review the past performance of the funds.
  • It is important to compare the size of funds with large Asset under Management (AUM). This is not applicable to new funds.
  • You should choose ELSS mutual funds that do not have additional costs.