ELSS as a Tax Saving Avenue

At the end of the financial year when the accountants run behind us for investment receipts, people are seen running from pillar to post to make some tax saving investment avenues. These are the investment options in which individuals can claim tax benefits by making their investment. Some of the tax saving investment avenues include PPF, NPS, tax saving fixed deposits, and so on. However, one of the most prominent tax savings avenue is ELSS or Equity Linked Savings Scheme. It is a category of mutual fund that predominantly invests its corpus in equity and equity-related products. Many mutual fund companies like Indiabulls Mutual Fund, JM Financial Mutual Fund, Mirae Mutual Fund, Sundaram Mutual Fund, and others offer ELSS scheme. So, let us learn more about ELSS scheme through this article.

Overview of ELSS

ELSS as mentioned in the earlier paragraph is a category of equity mutual fund scheme. This mutual fund scheme invests approximately around 80% of its collected money in equity-related products and the remaining 20% in fixed income products. ELSS is the only mutual fund scheme where any investment made is applicable for tax deduction. Individuals can claim a maximum deduction of up to 1,50,000 rupees by investing in ELSS. As a consequence, the maximum savings that an individual can make is 46,600 rupees. The returns in ELSS are not fixed as it is a market-linked products whose performance is dependent on the underlying asset’s performance. Also, the lock-in period of ELSS is very less as compared to other tax savings instruments, i.e., three years. Now, after understanding the concept of ELSS, now let us look at the advantages of ELSS.

Benefits of ELSS

ELSS has its own set of benefits like many mutual fund schemes. Some of the benefits of ELSS schemes are listed below as follows.

1. Ensures Money Growth: ELSS schemes ensure money growth thereby paving the way for wealth creation. Since, it is a combination of equity and tax savings, the long-term gains are high in ELSS. As a result, individuals are advised to hold their ELSS for a period of 5–7 years to exploit maximum possible returns.

2. Acts as Tax Saver: ELSS funds acts as a tax saver fund wherein individuals can claim tax benefits. As a consequence, individuals can enjoy double benefits through a single investment.

3. Has Shortest Lock-in Period: ELSS is said to have the shortest lock-in period with respect to tax savings options. The maximum tenure wherein individuals cannot withdraw their money from ELSS schemes is three years. Whereas, other tax saving avenues like PPF has a lock-in period of 15 years and National Savings Certificate or NSC whose lock-in period is 6 years.

4. Offers Tax-free Returns: The returns generated on ELSS schemes are considered to be tax-free. Therefore, individuals are liable to get the entire amount at the time of redemption.

Best ELSS Schemes

Now let us look at some of the best ELSS schemes which can be chosen for investment. These schemes are listed in the table given below.

Best ELSS Funds

Thus, from the above points, we can conclude that ELSS can prove to be a greatest investment option nevertheless, individuals should take the due care while investing their money to earn maximum returns.

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