Tax Saving Mutual Funds Under 80c – ELSS (Equity Linked Saving Scheme)
Tax Saving Mutual Funds Under 80c is also known as ELSS (Equity Linked Saving Schemes)
Equity Linked Saving Scheme (ELSS) is a popular investment option for people in India.
Those who are looking to save tax while investing in the stock market.
It is a type of mutual fund that primarily invests in equity shares of companies, and is eligible for tax benefits under Section 80C of the Income Tax Act, 1961.
ELSS funds are popular among investors because they not only provide tax benefits, but also have the potential to generate high returns in the long term.
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Here are some key benefits of ELSS funds – Tax Saving Mutual Funds Under 80c:
Tax benefits:
One of the key benefits of investing in ELSS funds is that they provide tax benefits under Section 80C of the Income Tax Act.
An individual can claim a tax deduction of up to Rs. 1.5 lakh per annum by investing in ELSS funds.
This means that the amount invested in ELSS funds can be deducted from an individual’s taxable income, which in turn reduces their tax liability.
Equity exposure:
ELSS funds primarily invest in equity shares of companies.
Which means that they have the potential to generate higher returns compared to other debt-based tax-saving investments like Public Provident Fund (PPF), National Savings Certificate (NSC), or Tax Saving Fixed Deposits (FDs).
Lock-in period:
ELSS funds have a mandatory lock-in period of three years. Which means that an investor cannot redeem their investment before the completion of the lock-in period.
This lock-in period helps to encourage long-term investing and helps the fund manager to take a long-term view of the portfolio.
SIP investment option:
ELSS funds offer the Systematic Investment Plan (SIP) option. It allows investors to invest a fixed amount of money at regular intervals.
This is a convenient way for investors to build a portfolio over a longer period of time and benefit from the power of compounding.
Diversification:
ELSS funds invest in a diversified portfolio of companies across different sectors.
It will helps to reduce the risk of investing in a single stock.
Professional management:
ELSS funds are managed by experienced fund managers. Fund managers have a deep understanding of the market and can make informed investment decisions based on their analysis of the market.
ELSS funds can be a good investment option for investors who are willing to take some risk for the potential of higher returns.
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Limitation of Tax Saving Mutual Fund under 80c or ELSS (Equity Linked Saving Scheme)
However, it is important to note that investing in ELSS funds does come with some risks.
The value of the investment can go up or down depending on the performance of the stock market. Past performance is not a guarantee of future returns.
Additionally, ELSS funds have a mandatory lock-in period of three years.
It means that the investor cannot redeem their investment before the completion of the lock-in period.
This can be a disadvantage for investors who may need the money for emergencies.
Conclusion
ELSS funds can be a good investment option for investors. Who are looking to save tax while also investing in the stock market.
However, investors should carefully consider their investment goals, risk appetite, and financial situation before investing in ELSS funds.
It is also important to do thorough research on the fund before investing. Consult with a financial advisor if necessary.
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