Sometimes, a chunk of your investments gets deducted through taxation. This limits your investment growth. To avoid this, most investors opt for Equity-Linked Savings Scheme or ELSS. A tax-saving investment scheme allows you to claim partial tax refunds. Through this scheme, investors save a considerable amount in taxes each year.
In recent times, ELSS has gained significant popularity. The credit goes to its numerous advantages. Besides tax savings, it is famous for other reasons:
Lowest lock-in period
Compared to other Tax Saving Funds, ELSS holds the lowest lock-in period. It is only three years than the usual five years. This allows investors to reap higher returns in a short lock-in period.
Tax gains
Taxation on gains is also lower under ELSS Mutual Funds. They offer a minimum investment period of three years. During this, any gains received from fund sales become long-term. Profits above Rs. 1 lakh are taxable at a 10% rate. The present law determines these rates. This way, investors minimise their tax expenses considerably.
Compounding
When you invest in Mutual Fund, you usually consider sustaining it. However, lengthy lock-in periods and taxation affect your continuity. They increase your market risks. As a result, you opt out of the investment scheme. ELSS Funds develops a discipline in your investment journey. They let you benefit from compounding. This ultimately facilitates the steady growth of your assets. Since the lock-in period is generally lower for such funds, it encourages you to contribute regularly.
High returns
In ELSS Funds, they typically heavily invest in equity schemes. This increases the returns more than other Tax Saving Funds. Moreover, profits from compounding combined with the gains on equity increase return considerably. Generally, ELSS returns range in the 15-20% bracket. This is also the highest among other tax-saving options.
Redemption
This aspect is not compulsory under ELSS Funds. If you are happy with the returns, you can continue the scheme. However, this applies only after the completion of three years. This period is the minimum investment duration. Also, there is no maximum investment duration in such funds. This way, you decide how long you want to remain invested.
SIP mode
ELSS offers investors a Systematic Investment Plan option. They enable investors to invest through a fixed sum regularly. This enables salaried individuals to invest from their savings easily. It also empowers them to start investing early.
Security measures
Investing in ELSS Funds is safe. The Securities and Exchange Board of India supervises every Mutual Fund scheme. This includes ELSS, Money Market Funds, Liquid Funds, etc. Hence, it is the safest investment option for investors. You can access your funds through Mutual Fund apps with enhanced security measures.
