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Equity - ELSS

What is ELSS?

ELSS is an acronym for Equity Linked Saving Scheme. It is a tax saving equity mutual fund investment which invests majority of its assets in equity related instruments.
It comes with a three-year lock-in period. Section 80C of the Income Tax enables an investor to avail up to a tax benefit of Rs 46,800 by investing upto Rs 1.5 lakhs per year in an ELSS. One can also invest more than Rs 1.5 lakh per year in an ELSS but the tax benefit would not exceed Rs 46,800 in a year.
ELSS is suitable for those who are open to risk, have patience and wish to claim tax benefits. It is important to note that gains earned on ELSS are subject to Long Term Capital Gains Tax (LTCG) of 10%.

How to invest in ELSS?

One can either invest a lumpsum amount or through a SIP method. In both cases, the lock-in applies. With reliancesmartmoney.com one can choose an appropriate ELSS scheme from the multiple tax saving mutual fund options available for investment.

Benefits of Investing in ELSS

  • Tax benefit

    Under Section 80 C of Income Tax Act 1961, elss investment can claim tax benefit of Rs 46,800 per year

  • Minimum lock in

    As compared to traditional tax saving instruments, the three year lock-in period required by an ELSS fund is minimal

  • Attractive growth rate

    Over a five year period or longer, ELSS funds can deliver between 15% to 18% growth which is better than the appreciation offered by traditional tax saving investment options such as Public Provident Funds (PPF), National Savings Certificate (NSC) and National Pension Scheme (NPS)

  • Can start small

    One can begin investing in an ELSS fund through the SIP route which can begin with a meagre amount. For example – one can start an SIP in an ELSS fund by investing just Rs 500 per month

  • Flexibility

    One can either change the plan or shift to another fund if the scheme in which one has invested is underperforming

Tax saving instrument

Lock in period

ELSS (Equity Linked Savings Scheme)

3 years

PPF (Public Provident Fund)

15 years

NSC (National Savings Scheme)

5 years

NPS (National Pension Scheme)

Until retirement