Equity Linked Saving Scheme (ELSS)
Benefits of equity with minimum lock-in
Why to invest?
- Mix of large and medium-sized stocks, carefully chosen after intensive research and analysis
- Potential for long-term capital appreciation and growth
- Save up to ₹46,800 in taxes
- Option to invest through SIP
- Lowest lock-in of 3 years
- Invest as low as ₹500
Know before you invest
- Investment amount for tax deduction: Minimum ₹500 to maximum ₹1,50,000
- Returns depend on the fund and market conditions
Frequently Asked Questions
What are ELSS funds?
ELSS funds are tax saving mutual funds, in which majority of the funds are invested in equity schemes.
What are equity funds?
Equity funds are schemes which concentrate their investments in shares of companies of different market capitalisation.
What is the lock-in period?
ELSS has a lock-in period of 3 years.
What is the maximum tax benefit that can be availed by investing in ELSS every year?
Under Section 80C, one can avail of tax benefit up to ₹46,800 by investing up to ₹1.5 lakh per year in tax-saving schemes such as ELSS. You can also invest more than ₹1.5 lakh in ELSS.
Why to invest in ELSS?
ELSS has benefits over other conventional tax saving instruments like FDs, NPS, etc. It has the lowest lock-in period and the returns are higher than the other tax-saving schemes.
Who should invest in ELSS?
Anyone who wishes to reduce income tax by investing in 80C tax-saving schemes. ELSS is an equity investment. Hence, it is more suitable for people who are open to risk and stay invested for a long time to reap the benefits.
Is there any tax associated with ELSS?
As the lock in period of ELSS funds are 3 years, the gains are treated as long-term gains and they are taxed at 10% for gains over ₹1 lakh.
Should I choose SIP or lump sum?
An SIP allows you to invest a fixed sum regularly in mutual fund(s) of your choice. A lump sum is when you invest on-time in bulk in mutual fund(s). SIP comes with few advantages:
- It allows you to invest small amount every month without the stress of paying in bulk
- Investing all through the year averages the cost of investing – you don’t end up paying too much per unit
- Gives you financial discipline