ELSS means Equity Linked Savings Scheme, a tax-saving mutual fund scheme that promotes long-term investment. One can avail tax exemption under 80C of Income Tax Act section on investment of up to one and a half lakh rupees in these schemes in a financial year.
If the equity was done in a small cap mutual fund, then today you would have got Rs 1,41,980 on the investment of Rs 1 lakh, that is a huge benefit of about Rs 42,000.
Equity Linked Savings Scheme is often considered as a tax saving saving or investment scheme by people only. Usually, by the end of the financial year, people want to increase the scope of tax exemption under 80C by investing in them. But if you are a serious investor, then the Equity Linked Savings Scheme can prove to be a great investment for your long-term fund creation.
ELSS means Equity Linked Savings Scheme, a tax-saving mutual fund scheme that promotes long-term investment. One can avail tax exemption under 80C of Income Tax Act section on investment of up to one and a half lakh rupees in these schemes in a financial year. However, there is no investment limit. In comparison to other traditional investment instruments like FD, NSC and Kisan Vikas Patra, it usually gives better returns and benefits of tax rebate.
You can invest beyond the lock in period
There is a lock-in period in ELSS but the specialty is that even after that you can continue investing in it. A scheme with a lock-in period of three or five years can also be held for a long time. Keeping it for a longer period increases the scope for increasing returns. The advantage of having a lock in period is that investors hold it for a long period, which also increases the scope for increasing returns. 80% exposure to ELSS should be in equity. It can technically be up to 100 percent. ELSS also has the flexibility to invest in all market caps. Which makes it a unique product among equity funds.
You can also enter through SIP
Investments in ELSS can also be made through SIP. This further increases the attraction of ELSS. The return on investment in ELSS and the amount of redemption is also completely tax free. ELSS offers better post-tax returns, as LTCG is exempted from income tax up to Rs 1 lakh a year from ELSS mutual funds. Taxes at the rate of 10 per cent have to be paid for profits exceeding this limit.