Does Investing In Mutual Fund Provide Income Tax Benefit? Yes it's ELSS Fund!

Equity Linked Savings Scheme 

Equity Linked Savings Scheme
If you are thinking to invest in mutual fund and also at the same time want to get tax benefits on your investments, Then ELSS (Equity Linked Savings Scheme) is the way to get it done!

About ELSS

An Equity Linked Savings Scheme (ELSS) is an open-ended mutual fund that doesn't just help you save tax, but also gives you an opportunity to grow your money. 
It qualifies for tax exemptions under section (u/s) 80C of the Indian Income Tax Act up to 1.5 Lac investment.

ELSS funds are a category of mutual fund promoted by the government in order to encourage long term equity investments. Under this scheme, most of the fund corpus is invested in equities or equity-related products. 
There are two categories in ELSS mutual funds which are dividend and growth.

Some key Features of Equity Linked Savings Scheme

  • You can invest in ELSS through the way of Lump-sum investment or through SIP (Systematic Investment Plan) 
  • Minimum Investment is as low as Rs. 500/-
  • Lock-in Period - 3 years from the day of investment. The same lack-in period is applied when you invest through SIP also.
  • Tax saving amount - up to 1.5 lac/year (In 80C Section)

What are the benefits of investing in ELSS

  1. High Returns - As the ELSS funds invest in equity related schemes, the returns on investments  are pretty good and that is around 12~15% (Subject to market risks). And other tax saving options generally provide 7~8% returns.
  2. ELSS offers exposure to stock market through guidance of fund manager - New Investors are not comfortable to invest in stock markets as they do not have knowledge about it. But  they want to grab the benefits from the market. In such case, investing in ELSS is a good option.
  3. ELSS is the only option present in market, which has the least locking period of 3 years. After 3 years you can withdraw your money from ELSS.
  4. Lower tax on Returns earned - As in ELSS fund money is invested for a minimum period of 3 years. And any returns from the sale of ELSS funds are therefore long-term returns. According to income tax laws in India gains above ₹ 1,00,000/- shall be taxable at the rate of 10%. To know more about taxes on mutual fund click here.
If any one wants his investments to grow at higher rate and mean while save taxes but ready to take moderate risk involved in stock market, Then ELSS fund is made for them. 

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