Equity Linked Savings Scheme (ELSS) are both an investment option that enable you create wealth in the long run and also provide you with tax benefits. The tool can be opted for due to some of its exclusive features.
1. Tax exemption or tax break advantage provided under ELSS is exemplary
As a lay-man it shall be quite easy to understand this with an example. Suppose you are an investor who falls in the highest slab rate of 30%, then if you happen to invest in ELSS scheme you shall be able to get 30% rebate on the investment amount.
Consequently your investment total comes to be Rs. 1,05,000 and if the NAV now after three years of time which was initially at Rs. 30 increases in value by double at Rs. 60, your initial investment amount trebles considering your investment after rebate of Rs. 45000 i.e. Rs. 1,05,000. So, an investor garners substantial after tax returns from ELSS.
2. SIP in ELSS funds is always better than lump-sum investment
As with the basic advantage SIP in mutual funds offer of power of compounding and cost averaging, SIP in ELSS will also offer the same. So with the rupee cost averaging, your chances of getting the lowest cost and highest yield are increased over the course of your ELSS SIP.
3. ELSS with 3-year lock in instill investment discipline and hence better returns
The foremost advantage is that the 3-year lock-in enables the investor to continue the investment so chances of getting off the investment with profits is avoided.
4. Other advantage of EEE and wealth creation due to wealth creation
Continuous equity exposure offers better yield as well as EEE advantage implies tax advantage is offered at the time of making investment, dividend income is tax free and also redemption does not result in any tax implication.