What are the Benefits of Investing in ELSS

What are the Benefits of Investing in ELSS

Equity linked savings schemes

ELSS stands for equity linked savings schemes. It is an open ended equity mutual fund that helps the investor to not only save on the money paid as tax, but also provides an opportunity with which one can grow and increase his money. It helps to channelize one’s funds effectively and make more out of what already exists. ELSS qualifies for tax exemptions under section 80C of the Indian Income Tax Act.

In case one invests in particular schemes like Equity Linked Savings Schemes, Public Provident Fund (PPF), certain bank Fixed Deposits (FDs), etc. one is free and allowed to claim up to Rs.1,50,000 as a deduction from his or her gross total income in a financial year under Section 80C of the Income Tax Act of 1961.

It is very important to first thoroughly study before investing in any thing. The first step to make a well-informed and sound decision is to know exactly what one is getting into. It is imperative to the weigh the pros and cons and only then take the final plunge which may be life changing. There are several advantages of Equity Linked Savings Schemes. Thus, they are good to invest in at the moment. A few reasons why you must invest in ELSS are as the following stated below: (That’s other than tax deductions, of course!)

* This is a golden chance to build on one’s money by investing it logically and strategically in the equity market.

* Long-term capital gains resulting from these rapid gaining popularity funds are absolutely tax free and give a sense of security to the investor.

* The lock-in period is only 3 years. This is very less when compared to other schemes that are available in the market and world around.

* It is also possible to opt for a Dividend Payout option. This aids in realizing some potential profit during the lock-in period. However, it is imperative to note that the any sum of dividend payment will be from the NAV (Net Asset Value) of the scheme and thus, the NAV will depend totally on the extent of the dividend payment. Besides, the dividend payment is subject to availability of distributable surplus and approval from the trustees.

* One can invest through a Systematic Investment Plan and ensure a systematic and timely tax planning which is very important.

ELSS, that was previously totally tax free, will be taxed at ten percent from this year. This decision has been taken by the finance minister. However, even with this new introduction, ELSS is a top pick for those who wish to invest their money. Also, it continues to remain with any fixed maturity date. Having said all of this, I would also like to clear that there may be certain disadvantages as well which must be read about for further knowledge.

Please note:

Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing.