ELSS is short for Equity Linked Savings Scheme. ELSS are tax-saving mutual funds which help the investors to reduce taxable income by up to Rs 1.5 lakh under Section 80C. ELSS funds have a lock-in period of only three years.
ELSS invest a majority of their portfolio in the stock market. ELSS is suitable for all types of investors who want to spend money in tax planning instruments. There is no age limit to start on an ELSS. Here are the five reasons to invest in ELSS:
Equity Linked Savings Schemes is also known as tax-saving mutual funds. They are the best way to save on taxes. Under Section 80C of the Income Tax Act, 1961, the investor can invest up to Rs 1,50,000 in PF, PPF, ELSS, NSC, 5-year bank FDs, ULIPs, Senior Citizen Saving Schemes and more, to claim deductions on Income Tax. Under ELSS you can claim a deduction on your income for the amount you invest in this.
ELSS invest primarily in the equity markets. That's how they have the potential to deliver market linked returns. Where other instruments invest in government, corporate debt. When compared to this ELSS can perform well and give you better returns.
Short lock-in period
ELSS has the shortest lock-in period and liquidity when compared to the other instruments. Investment options under Section 80C have a long lock-in period. PPF has a lock-in of 15 years. NPS has the lock-in period until you reach age 60 years. The maturity period of NSC is 6 years. ELSS has a lock-in of 3 years only. The investor will get the money faster. How To Open A National Pension Scheme (NPS) Account Online?
Tax-free capital gains
When an investor invests in tax-saving mutual funds, their income tax liability decreases. Whether it is through dividend or capital gains, the investor doesn't have to pay taxes on his or her earnings from ELSS.
Low minimum investment
You can start investing in ELSS even if you don't have a huge amount with you. With a sum of Rs 500, you can start investing in ELSS. There is no maximum limit. You can invest multiples of Rs 500. 5 Best Tax Saving FDs With High Interest Rates