Don’t Just Save Tax; Earn on Your Savings – ELSS Mutual Funds

wealthfundUnder section 80C, falls a number of tax saving investment schemes that allow individuals to save a sizable amount of tax. Most of the investment options offer fixed returns on savings except one that is ELSS. Equity Linked Saving Scheme is known to be one of the best ways to save tax and grow money at the same time. Recently, huge inclination was witnessed towards ELSS funds, which has continued to increase with time.

ELSS Mutual Funds– What are they?

ELSS or Equity Linked Saving Scheme mutual funds is a type of mutual fund schemes, which invests more than 50% of its funds in equities or equity related instruments, allowing investors to avail tax benefits. There are dozens of ELSS funds that fall under Section 80C and provide tax benefits.

What are the benefits of investing in ELSS Mutual funds?

ELSS mutual fund benefits investor in lots of ways. Such as:

1) Grow money with ELSS mutual funds: ELSS funds invest in equities or equity related instruments, therefore these funds allow you to grow money faster with the growth of stock market.

2) Save tax upto Rs 1 Lakh: Investing in ELSS enables investor to avail tax exemption upto Rs 1 Lakh. Since ELSS falls under section 80C, it can help investor to save more tax, while growing money.

3) 3 years of Lock-in Period: With lock-in period of 3 years, ELSS mutual fund has become one of the most sought after funds for those, who wish to gain benefits of long term investment schemes. Investor can not withdraw money until it’s mature. Investor has to keep investing for 3 years, which is the shortest lock-in period among the traditional tax saving schemes.

4) Tax Free Returns: When traditional Tax saving schemes are compared, only PPF offers tax free returns among the rest. Investment options such as Tax Saving Bank Fixed Deposit, NSC and even Post office TD scheme are come with taxable returns (tax levied as per individual tax slab).

Though PPF is tax free, but comes with long lock-in period of 15 years. ELSS is the only tax saving investment scheme that not just offers tax free returns, but also comes with shortest lock-in period of 3 years. Returns received after 1 year of investment is completely tax free.
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