ELSS Fund –Equity Linked Savings Scheme Fund has become a generic term in mutual fund. ELSS is good tax saving instrument but still it is not used by maximum Indians. In India there are close to 3.5 crore individual taxpayers but less than 20% have ever invested in Mutual Fund ELSS.
What is ELSS Mutual Fund?
ELSS-Equity linked savings scheme. It is a type of diversified equity mutual fund scheme. Investing in ELSS mutual funds gives you double benefits of tax deduction and capital appreciation. Section 80C of the income tax act eligible for tax exemption.ELSS lock period is 3 years.
Why should you invest in ELSS?
When planned efficiently, investing in ELSS helps you to save your money. ELSS funds are tax free. No tax on interest, principal amount or maturity amount.
When it comes to withdrawals, it is also free since hold period is more than 1 year. It means no taxes on capital gains.
Benefits of ELSS:
Tax benefit under section 80C of income tax.
Lock in period of ELSS is 3 years.
Profits you have from ELSS is completely tax free.
Dividends are tax free.
Can be Volatile in short period
Who can invest in ELSS?
Any individual or HUF in India can invest in ELSS. NRI’s can also invest in ELSS. But most companies do not accept investments from NRIs from US, Canadian citizens.
ELSS offers the best tax saving and good return. It is like killing 2 birds in one shot namely Return & tax saving. If you think of investing in ELSS, always opt for SIP option to invest and preferably go for Growth option to redeem instead of dividend option.