Consider Equity Linked Savings Scheme (ELSS) Mutual Funds if you’re seeking for a means to possibly increase your money in the long term while reducing your tax burden. ELSS Mutual Funds, often known as ELSS funds, are a well-liked form of investment in India. ELSS Mutual Funds, what makes them unique, why you should consider them, and which ones are worth a look are all covered in this simple guide.
What is an ELSS Fund?
ELSS is a special category of equity mutual funds that provide tax benefits under 80C with a minimum investment duration of 3 years. In ELSS Mutual Funds, the majority of your money is invested in equities and other linked securities.
Being able to reduce your tax liability under Section 80C of the Income Tax Act makes ELSS funds special. This means that investing in ELSS funds allows you to lower your taxable income by up to Rs. 1.5 lakh.
One crucial fact to be aware of is the three-year lock-in period before withdrawing any money from ELSS funds. So, the money that you do not require in 3 years should only be invested in ELSS funds. The scheme
Please note that the 80C tax deduction is available for investors who are still filling their tax returns under the old tax regime. For investors filing under the new tax regime, there is no special benefit that an ELSS fund provides.
Benefits of Investing in ELSS Mutual Funds
- Tax Effectiveness: You can avail up to 1.5 lacs deduction in taxable income under 80 C if you are still filing under the old tax regime. Consult your tax advisor for making the right decision among new or old tax regimes.
- Long Term Investing: There is a minimum lock-in period of 3 years before you can withdraw any money from the ELSS scheme. This promotes the customer to save and invest for the long term in equity markets for experiencing the real benefits.
- Professional Management: ELSS Funds, as similar to all Mutual Funds, are professionally managed by a fund manager who builds a well-diversified long term portfolio for long term wealth creation.
- Investment Method: You have the option of investing in lump-sum or SIPs in ELSS funds
Top ELSS Mutual Funds to Consider
Some of the Top Performing ELSS Mutual Funds
- HDFC ELSS Tax Saver
- SBI Long Term Equity Fund
- Parag Parikh Tax Saver Fund
- Nippon India Tax Saver Fund
- Mirae Asset Tax Saver Fund
- Quant Tax Plan
Please note that past performance is not indicative of future returns. Talk to our investment expert for choosing the right ELSS Plan for you.
Conclusion
ELSS Mutual Funds are tax-effective modes for investing in equity markets if you are filing tax returns under the old tax regime. They offer professional management of your funds in equity markets and encourage you to stay invested for the long term to realize the benefits of investing in equity markets.
Frequently Asked Questions
1. What is the waiting period for ELSS Mutual Funds?
Three years are required as a waiting period for these mutual funds.
2. Can ELSS Mutual Funds help me grow my wealth over the long term?
Yes, because they invest in equities, which are expected to perform well over time, these Mutual Funds may help you increase your wealth in the long run.
3. Do I have to pay taxes on the returns from ELSS Mutual Funds?
Taxes are required to be paid on the returns from ELSS Mutual Funds, yes. The returns are taxed at 10% if they surpass Rs. 1 lakh in a fiscal year and are known as Long-Term Capital Gains (LTCG) after three years.
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