ELSS stands for equity
linked savings scheme and it is one of the foremost investment options under
which you can save taxes under Section 80C of the Income Tax Act. If you are
wondering how to invest in ELSS, you should know that these schemes are quite similar
to other open-ended funds in the equity space although they have lock-in
periods of 3 years. However, the minimum amount for investment can be as low as
Rs. 500 every month without any upper threshold or limit for investing. You can
either invest via a lump sum amount or choose SIPs (systematic investment plans).
Keep in mind that each and every installment you
make accordingly will have a lock-in period of 3 years. Along with long-term
wealth generation, you can garner attractive returns that may surpass inflation
as well. Investing through SIPs will help you benefit from rupee cost averaging
along with compounding, enabling better protection against market volatility
and long-term capital appreciation. Choose ELSS
funds
on the basis of several parameters like consistent performance in the long
term, rate of returns (adjusted for risks), reputation of the mutual fund
house/firm and the terms and conditions.
Why
ELSS funds are beneficial for your portfolio
Now that you know what is ELSS and know more about
investing in these schemes, there are various benefits in store.
·
Lower Lock-In Period- ELSS investments come with 3-year
lock-in periods which are considerably lower in comparison to other tax-saving
investments like tax-saver FDs which have 5-year lock-in periods, PPF which has
a 15-year lock-in period and NSC which has a lock-in period of 6 years.
·
Tax Savings- ELSS tax saving mutual funds will help you save considerably on
your tax outgo. Investments are eligible for deductions up to Rs. 1,50,000
under Section 80C. Tax efficiency makes these schemes great options for
investments.
·
Building Wealth- ELSS schemes will help you get inflation-beating returns over the
long haul, helping you amass wealth considerably over a span of 3-5 years or
more.
·
Professional Management- Unlike many
other investment options, ELSS schemes will be managed professionally by market
experts. They will naturally aim at ensuring the highest possible gains/returns
for their clients.
·
Flexible SIPs- For paying smaller
amounts every month instead of a lump sum amount and benefiting from cost
averaging and compounding alike, you can choose SIPs (systematic investment plans)
for amounts as low as Rs. 500 a month.
Of course, you should take a closer look at the
market performance of the ELSS
scheme that you have chosen along with its returns (adjusted for risk) over a
sustained time period. Make sure that you shortlist a reputed mutual fund house
as well. These schemes will help you earn good returns while helping you save
on taxes as well.
You can flexibly continue with the investment after
3 years or withdraw your money as per your convenience or needs. These are some
of the reasons why you should choose to invest in ELSS plans.
