ELSS: To Invest Or Not To Invest?

ELSS: To Invest Or Not To Invest?

Mutual Funds would be one of your options if you’re looking to save taxes. But, while different Mutual Funds are tax-efficient, not all Mutual Funds offer tax benefits. Equity Linked Savings Schemes (ELSS) is one category of Mutual Funds which provides investors with tax benefits. Read on to get answers to some frequently asked questions about ELSS investments.

ELSS? What’s that?

Equity Linked Savings Schemes are a type of diversified Mutual Funds. These schemes are eligible for tax deductions up to Rs. 1,50,000 under Section 80C of the Income Tax Act. You can enjoy double benefits with ELSS: capital appreciation and tax benefits.

Is there a lock-in period for Equity Linked Savings Schemes?

Equity Linked Savings Schemes have the lowest lock-in period among all tax saving investment instruments. The lock-in period for ELSS is 3 years.

Equity Linked Savings Schemes vs other tax saving options

Which one to choose?

We’ll help you choose between the popular tax saving instruments.

• ELSS offers the least lock-in period of 3 years.
• A PPF account has a lock-in period of 15 years and
• National Savings Certificates have a 5 year and 10 year tenure.
  What’s more, the dividends declared in ELSS are tax-free. No tax is levied on long-term capital gains. But, you must remember that the risk factor with ELSS funds is high as these schemes invest in the stock market.
  
  
  How much can you invest in Equity Linked Savings Scheme funds?
  You can choose to invest as little as Rs. 500 every month in an ELSS fund. There is no maximum investment limit.
  Here’s a tip: It’s always better to invest in Equity Linked Savings Schemes through a Systematic Investment Plan (SIP) to reduce market volatility.
  What kind of investors are Equity Linked Savings Schemes suitable for?
  Investing in ELSS funds is a good option for an investor who is not uncomfortable with taking a certain degree of risk with their investments. If you need to invest in tax saving instruments, you can consider Equity Linked Savings Schemes.
  How do you claim tax benefits on investments in Equity Linked Savings Scheme funds?
  
  
  
  
  
  
  Claiming tax benefits on your investments in ELSS funds is easy. Tax deductions under Section 80C of the Income Tax Act can be claimed upto a maximum of Rs. 1,50,000 per year. You only need to give a copy of your ELSS account statement to your employer as a proof of your investment.
  Can an investor continue to hold Equity Linked Savings Scheme funds after the lock-in period?
  Yes. It is generally advisable to remain invested in ELSS funds for at least 5 years or longer, to enjoy higher returns.
  Happy Investing
• Source:Bankbazaar.com