ELSS Tax Saving Mutual Funds

Most of us are looking for ways to save when the tax officer knocks on our door. Most of the time, we tend to ignore ELSS knowingly or unknowingly. Equity Linked Savings Scheme (ELSS), a diversified tax saving mutual fund, is one in which a majority of the capital is invested in the equity markets.

Now you can invest in ELSS systems via the SIP route. However, you must note that each investment has a lock-up period of 3 years from the date of investment. ELSS funds offer you two growth and dividend options. The growth option gives you a lump sum at the end of the lock-up period, while the dividend option gives you a dividend whenever a fund declares a dividend, even if it’s on lock-up.

ELSS funds are becoming an increasingly popular tool. Let’s find out why it could be a useful investment for you.

Benefit from tax savings and investments

ELSS gives you double the benefits. Additionally, due to its market advantage through equity exposure, it helps your money grow faster while keeping your taxes under control through Section 80C benefits. Therefore, unlike PPF, ELSS is not just a simple savings tool. ELSS gives you the opportunity to generate solid returns and at the same time save on your taxes.

Shorter commitment period compared to other tax savings options

ELSS has the lowest lock-in period of just three years compared to other popular instruments. These include PPF (15 years), NSC (6 years) and Tax Saving FD (5 years). Therefore, ELSS enjoys the highest liquidity among other options.

Returns that are superior and tax-free

All options available under Section 80C are income from ELSS and PPF exempt from tax. In addition, ELSS offers you the best returns due to its market advantage. Income from NSCs and FDs is taxable. Therefore, ELSS offers you the best returns among all instruments.

opensup participation

You may have reservations about investing in mutual funds. Additionally, if you have not invested directly or indirectly in the stock markets, ELSS is the best way for you to start your equity journey. When investing in the markets, directly or indirectly, a small rise or fall in the markets can trigger a wrong selling decision. This is where ELSS becomes important. A 3-year lock-up period in ELSS keeps you locked in and you can see clear returns over a three-year period. If you look over the last two decades, ELSS has had the best returns below 80C compared to any other.

Therefore, invest in ELSS tax savings funds via SIP to save on taxes and earn excellent returns while balancing your market risks.