ELSS stands for Equity Linked Savings Scheme which is a Mutual Fund which is open-ended and allows for tax savings as well as allows for opportunities to grow your money.

What Is An Equity Linked Savings Scheme?

An Equity Linked Savings Scheme has two major aspects:-

  • Equity
  • Savings

The Equity part implies that the Equity Linked Savings Scheme requires you to invest in Equity as a part of your overall investment portfolio.

Equity here refers to the shares in a company like TCS or Reliance Infocom Limited. Technically, Equity refers to the value of the shares that are issued by a company by a big corporation.

The thing that distinguishes an Equity Linked Savings Scheme from other mutual funds is that an ELSS has a Savings component.

An Equity Linked Savings Scheme comes under section (u/s) 80C of the Indian Income Tax Act which qualifies for tax exemptions on income tax.

This is how an ELSS can benefit you in more than one way. But all of this comes with a catch. An ELSS Fund comes with a lock-in period of three years.

Types Of ELSS Funds?

There are two classes in ELSS funds which are Dividend as well as Growth.

The profit fund is additionally separated into Dividend Payout and Dividend Reinvestment. On the off chance that the investor selects for the dividend payout alternative, he gets the profit which is likewise charge-free, however, under the profit reinvestment choice, the profit is reinvested as a new investment to buy more shares.

Under the Growth alternative, the investor can search for long-term creation of wealth. It works like a total alternative whose whole value is acknowledged upon redeeming the mutual fund.

How To Invest In An Equity Linked Savings Scheme?

One can put resources into ELSS through two techniques, for example, lump sum or SIP.

An SIP or Systematic Investment Plan is an investment plan where the investor needs to contribute a settled measure of cash each month at a predetermined date. A Systematic Investment Plan teaches a taught methodology towards putting resources into an investment. A Systematic Investment Plan additionally gives the advantage of rupee cost averaging to the investor.

What Is The Lock-In Period For An Equity Linked Savings Scheme?

ELSS reserves have a lock-in period of three years. In comparison to the Public Provident Fund, National Savings Certificate, Employees’ Provident Fund and different prevalent investments under Section 80C, an Equity Linked Savings Scheme has the briefest lock-in period.

What Is The Advantage Of Taxes In ELSS?

The basic role of any mutual fund investment is to pick up deductions from income tax. ELSS funds fit that bill impeccably. An investor gets a double-edged advantage of sparing taxes and riches creation in the meantime. Profits earned from ELSS reserves are additionally exempted from assessment. ELSS reserves additionally give the advantage of long haul capital gains as they have a lock-in time of three years.

What Is The Investment Limit Of ELSS Funds?

One can begin putting resources into ELSS shared assets with a base measure of five hundred rupees, and there is no furthest limit on how much an individual can put resources into ELSS reserves. Be that as it may, the expense sparing roof is just up to a limit of Rs 1,50,000 per year.

What Are The Dangers Associated With ELSS Reserves?

ELSS common assets don’t have ironclad assurance over returns, as they generate their income from interests in the value advertise. By and by, probably the best­ performing ELSS shared assets have given reliable and inflation-beating returns in the long run. This quality isn’t controlled by the other settled pay tax­-saving ventures like Public Provident Fund and Fixed Deposits.