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ELSS Funds – An Excellent Investment Option

Jul 31, 2019
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ELSS or Equity Linked Saving Scheme is an open-end scheme for investing in mutual funds while helping you in saving income tax. An open-end fund refers to a mutual fund in which shares are issued at their NAV (Net Asset Value). Also, the section 80-C of the Income Tax Act states that taxpayers are allowed to invest a total of 1.5 Lac in particular securities. This invested amount can be deducted from their total taxable income and thus, ELSS is also called tax-saving funds. It is a great investment option as you can start investing in ELSS with a minimum amount of 500 Rupees, with no upper limit.

Important Facts About ELSS

ELSS allows you to invest a minimum of 500 Rupees & a maximum of 1.5 Lac per year, in compliance with the section 80-C of Income Tax Act.

The major percentage of these funds’ portfolio is invested in the equity.

The lock-in period of these funds is for 3 years, which is shorter than all other tax-saving investments.

ELSS Funds offer dual benefits i.e. Tax Saving & Capital Appreciation.

You can choose to get regular income through dividend payouts or choose long term capital appreciation growth.

In long-term, ELSS funds can offer 10% to 12% returns, which is more than any other tax-saving investment schemes.

However, there are risks involved in ELSS because of the nature of equity investments.

How Can You Invest In ELSS?

  • Investing in ELSS is quite similar to any mutual funds investment.
  • First of all, an investor needs to be KYC Compliant to be eligible for investing.
  • The investor can always invest easily through Online Investment Services Account.
  • Investors can choose to invest through SIP (Systematic Investment Plan) with a minimum amount of 500 Rupees every month.
  • Also, investors can invest on a lump-sum basis.
  • Although, the tax redemption is allowed only up to 1.5 Lac, yet you can invest as much money as you want.

Important Tips For ELSS Funds Investment

Make sure to perform thorough market research before investing in ELSS, as it will help in ensuring better results in long-term.

Always talk to a market expert about which investment method would be best for you between SIP & Lump-Sum.

As the risk factor is prominent in ELSS, investing in different funds would be a better option rather than just investing in one.

The Growth Option is much better than the Dividend Option, as returns are expected to be greater in the long-run.

Invest in diverse ELSS funds rather than in one, as this will improve the chances of better returns while reducing the risk factor. 

Although, ELSS can prove to be a great short term investment as compared to PPF & other investment plans, yet the risk factor is also high. Thus, you need to make sure that proper research is performed by you before making the final investment decision.

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