Why should you invest in ELSS?
To offer perspective, other investments under Section 80C like PPF has a lock-in of 15 years and NSC has a lock-in of five years. Hence, ELSS funds with the least lock-in and potential to generate market-linked returns make them worthy of consideration for inclusion in your tax-saving investment portfolio.
What is an ELSS fund?
ELSS or Equity Linked Savings Schemes are Mutual fund investment schemes that help you save income tax. That’s why they are also known as tax-saving funds. The Income Tax Act, under section 80c, allows taxpayers to invest up to INR 1.5 lakh in specific securities and claim it as a deduction from their taxable income.
What is ELSS fund and how it works?
ELSS Funds are diversified equity funds. These funds primarily invest in stocks of listed companies in a specific proportion according to the investment objective of the fund. The stocks are chosen from across market capitalisation (Large Caps, Mid Caps, Small Caps) and industry sectors.
When should you invest in ELSS?
At the time when the lock-in period ends, if the NAV of ELSS funds are lower than buying price, it’s better to wait another 1-2 years or even more time to redeem when the market bounces back. Some investors use ELSS to fund their retirement or a long term plan.
Is ELSS safe to invest?
ELSS is the only kind of mutual funds covered under Section 80C of the Income Tax Act, 1961. ELSS funds have the shortest lock-in period among all Section 80C options. Nevertheless, it offers better scope for long-term wealth creation, people with more risk tolerance favour it.
When should I invest in ELSS?
Is investing in ELSS safe?
What is ELSS (equity linked saving scheme)?
As the name suggests, Equity Linked Saving Scheme or ELSS is a type of mutual fund scheme that primarily invests in the stock market or Equity. Investments of up to 1.5 Lac done in ELSS Mutual Funds are eligible for tax deduction under section 80C of the Income Tax Act.
Should you invest in ELSS funds to create wealth?
And being an equity mutual fund, it has the potential to create wealth over the long term through equities. But, the other big benefit you get for investing in ELSS funds is the fact that you can claim up to Rs 1.5 lakh tax deduction under Section 80C. No other mutual fund provides you this benefit.
What are the tax benefits of ELSS schemes?
ELSS allows you to save taxes, as investment upto ₹1.5 lakh in these schemes is eligible for tax exemption. Investment portfolio of ELSS consists of balanced allocation to different asset classes such as equity and debt securities.
What is the lock-in period of ELSS mutual funds?
ELSS Mutual Funds have a lock-in period of 3 years. What is the maximum tax benefit that can be availed by investing in ELSS every year? Under section 80C, one can avail tax benefit of upto ₹46,800 by investing upto ₹1.5 lakhs per year in ELSS.