Equity Linked Savings Scheme is one of many investment options you have. It offers excellent tax benefits which makes it an attractive investment tool. Let’s look at the ELSS and why it should be part of your portfolio.
What’s the ELSS Mutual Fund, and how can I get it?
Equity Linked Savings Scheme is a type mutual fund . Its funds are invested in both equity and equity-related schemes. These units come with a three-year lock-in period. These units cannot be transferred to or redeemed to another scheme during this lock-in period. However, you can claim tax benefits for any year in which you invested. When investing in ELSS, you can opt for a lump sum investment or SIPs.
Open-end
Open-end ELSS allows you to invest whenever you like. You can still use the three-year lock-in period. After the lock-in period ends, you can still redeem it at any time.
Closed end ELSS
Closed-end ELSS can only be invested in during the New Funds Offer period. After the three-year lock in period, you can release the funds at any time.
ELSS Features
These are just a few of the many features that make ELSS an attractive investment option.
- It can be invested in via SIP. This is an easy and effective way to guarantee a steady flow of funds. It can also reduce volatility in the stock market to a certain extent.
- There is no outflow with ELSS as your investment remains locked for three consecutive years. Even in difficult market conditions, you cannot withdraw your money. Even during bear runs, there is no outflow or investor panic. This increases capital appreciation.
- ELSS aims to achieve high capital appreciation. This scheme is equity-linked and therefore a high-return asset. There is no guarantee that returns will be achieved with market-linked assets.
- ELSS is more flexible than assets with a longer lock-in time, but the gains they can bring are often higher than those associated with assets like PPF, NSC and VPF.
- There is no upper limit to ELSS. You can put as much money as you have the risk appetite. ELSS is a great investment option for everyone because the return is tax-free. You can claim Rs. 1.5 lakhs (maximum) to be exempt from tax.
ELSS – The Advantages
ELSS investing has many benefits
- Tax Saving ELSS is a tax-saving tool. Under section 80C of Income tax, you can get a deduction up to 1.5 lakhs. Mutual funds tax is not attractive. This mutual fund is the best because it allows you to save a lot and also gives you high returns.
- Lower tax: ELSS attracts a lower tax because it has a lock-in period, and the returns are long-term capital gains.
- Higher Return ELSS offers a high potential return. To maximize your benefits, you should invest at least five years.
- Anyone can Invest. Do you lack sufficient knowledge about stock market? It shouldn’t stop you investing in ELSS.
Tips to help you Invest in ELSS
These are the things to keep in mind if you’re considering ELSS investments:
To maximize your returns, invest early and continue to do so.
Do not look at the scheme’s short-term performance when choosing a plan.
If the scheme is performing well, do not immediately withdraw funds.
ELSS has the same risk as other equity schemes. The company where the scheme is invested will determine the amount of ELSS investment. The price will fall during a bear market, while it will rise during a bull run.
