Tax Saving or Wealth Creation? Why Not Both?
But, with ELSS funds, you can save tax up to ₹46,800 u/s 80C & create wealth.
What is ELSS Fund - Tax Saving Mutual Fund?
An Equity Linked Savings Scheme (ELSS) is a tax saving mutual fund that allows an individual or HUF, a deduction from total income of up to ₹1.5 lakhs under Sec 80C of Income Tax Act 1961.
If an investor was to invest ₹50,000 in an ELSS, then this amount would be deducted from the total taxable income, thereby reducing tax burden.
These schemes have a 3-year lock-in from the allotment date. After that, units can be redeemed or switched to other mutual funds. Investors can also invest via SIPs, with up to ₹1.5 lakh per financial year eligible for tax deduction.
Know more about ELSS Mutual Fund
Watch the video to know more about ELSS Mutual Fund
What are the advantages of investing in ELSS Funds?
Shortest lock-in period
ELSS funds have shortest lock-in period of 3 years among other tax saving options like PPF, NSC etc.
Affordability
Investors can start investing in ELSS funds with as little as ₹500/-
Tax benefit
Under Section 80C of the Income Tax Act, 1961, ELSS funds can save tax up to ₹46,800/- by investing ₹1,50,000/- per Financial Year.
Convenience
In ELSS funds you can Invest in one go as lumpsum or invest in instalments with SIP
Higher returns potential
ELSS funds majorly invest in equities & its return capability can be superior to that of other tax saving options
Expert management
ELSS mutual funds are monitored and managed by expert fund managers with a deep knowledge about equity
Who should invest in Tax Saving Mutual Funds?
- ELSS funds are suitable for any taxpayer who is willing to invest in an equity oriented tax savings instrument.
- ELSS funds are very suitable for the salaried class as they have a regular source of income and need to make tax saving investments every year
Should I invest in ELSS through SIP or in Lumpsum?
- Your choice between SIP and lumpsum ELSS investment depends on timing and purpose. For last-minute tax saving, lumpsum works best. If investing early in the year, either SIP or lumpsum suits. ELSS offers tax benefits and equity growth potential.
- Investing in ELSS through SIP offers key benefits: it reduces risk by spreading investments over time, enables better average unit prices through rupee cost averaging, and makes investing easier on your wallet. Just ensure your total yearly SIP amount matches your intended ELSS investment.
Table Example
- Industry Classification as recommended by AMFI
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