An ELSS mutual fund is an investment instrument that invests largely in equity. With ELSS funds, you can enjoy portfolio diversification, several tax benefits, and a potential for high returns.
Investing in the twenty-first century is primarily defined by two elements - choices and technology. With regard to the former, there is no dearth of investment avenues for you to choose from, whether it is conventional fixed-income securities such as bank deposits or ever-evolving market-linked instruments such as mutual funds, shares, and Exchange Traded Funds. While selecting any investment instrument for your portfolio, you must consider several factors, ranging from risk to return, investment timeline to taxability. If you are looking for a tax-saving investment option, then ELSS mutual funds can be an effective choice.
In this article, we shall discuss
ELSS mutual funds or Equity Linked Savings Schemes are one of the types of mutual funds available in India. Such funds invest more than 80% of their total corpus in equity stocks of companies spanning sectors and capitalisation. The lock-in period for ELSS funds in India is 3 years, which is why they're usually classified as a medium term investment vessel.
One of the defining features of ELSS mutual funds is that they are tax saving mutual funds. By investing in an ELSS fund, you can become eligible for a deduction of up to Rs. 1,50,000 from your total income. Available under Section 80C of the Income Tax Act, 1961, the aforementioned deduction can help you reduce your taxable income and, in turn, your overall tax liability.
Additional Read: ELSS vs SIP: Key Differences You Need to Know
ELSS funds are a worthy addition to any investment portfolio, particularly if the aim is to save tax and potentially gain from the long-term capital appreciation in equity stocks. Here are some of the prominent benefits of ELSS mutual funds:
You can choose the best ELSS mutual fund for your portfolio by considering a host of factors including your investment goals, desired risk exposure, tax saving goals, the credibility of a particular fund house, the expense ratio for the fund, the returns from the fund over the past few years, etc. Once you have selected an ELSS mutual fund to invest in, you can start your investment through a lump sum amount or a Systematic Investment Plan (SIP) for periodic investments.
Here are the various channels through which you can invest in ELSS funds:
ELSS mutual funds offer investment in diversified equity stocks along with significant tax benefits. As is the case with most mutual fund investment plans, you can opt for the SIP route of investment.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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