ELSS: ELSS mutual funds are an excellent option for those looking to grow their money while saving taxes. The short lock-in period, SIP options, and superior equity-related returns make them one of the most attractive tax-saving instruments today.
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ELSS special: Every year, the worry of saving taxes troubles millions of people. They wonder which investment option to choose that provides both tax relief and good returns. The solution to this dilemma is ELSS, or Equity Linked Savings Scheme. This mutual fund option not only provides tax exemption but also can provide better returns in the long run.
Why is ELSS special?
Investing in ELSS mutual funds entitles you to tax exemption under Section 80C of the Income Tax Act. This means you can save tax on up to ₹1.5 lakh annually. This is the same limit that applies to PPF, life insurance premiums, and other tax-saving instruments. However, the unique feature of ELSS is that it is equity-based, i.e., linked to the stock market, which increases the potential for long-term returns.
Lock-in period and flexibility
The lock-in period for ELSS is only 3 years, compared to 15 years for PPF and 5 years for NSC. This means that ELSS offers a more flexible option if you need quick access to funds. Furthermore, you can invest small amounts each month through a Systematic Investment Plan (SIP).
Returns and Risks
Since ELSS is equity-based, it is subject to fluctuations. However, in the long run, it offers better returns than traditional tax-saving options. For example, over the past several years, ELSS funds have averaged 12-15% returns, while PPF interest rates have remained around 7-8%.
Lessons for Investors
Many young investors are now preferring ELSS because it offers them the opportunity to save tax while also creating wealth. Experts say that if you stay invested for a long period, the impact of market volatility is mitigated and returns become stable.
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