ELSS Funds: A great tax saving instrument

Equity Linked Savings Scheme or ELSS funds are directly offered by the fund managers and are handled by expert finance professionals. Besides opportunities to create wealth and enjoy a short lock-in period, ELSS funds come with an array of benefits that include tax savings and guidance of a professional fund manager.

Reasons that make ELSS a great tax saving instrument

When compared to other tax-saving investment options like PPF, FD, NSC and others that are available under Sec 80C of ITA, ELSS is a winner.

The following features of ELSS make it a great investment option and also help to save on tax:

  • Good returns on Investment: ELSS makes investments in the equity market which earns investors higher returns on their investments when compared to most other investment options. Besides good returns, the tax-saving feature of ELSS makes it a favourable investment option for those investors who want to park their money for medium-term or long-term. On the basis of past performance in the last 10 years, ELSS has managed to generate over 12% when compared to the 8% returns earned through PFF.
  • Tax-Efficient: ELSS offers better returns than most other investment options; in a financial year, ELSS offers investors the opportunity to save up to Rs.46800 under Sec 80C.
  • Investment Tenure:  ELSS comes with a lock-in period of 3 years, which is comparatively shorter than that of other investment tools like Employee’s Provident Fund, National Savings Certificate and Public Provident Fund which come with minimum investment tenure of 5 years.
  • Flexibility: ELSS offers its investors the feature of flexibility which allows them to manipulate their fund as per its performance and can shift to other funds anytime as soon as they complete the lock-in period.  This option may not be available to other investment options.
  • Protection against Volatility: ELSS is deemed as a good stepping stone for first-time investors who want to inculcate a sense of discipline towards investments. The lock-in period helps to build a patient outlook towards investment and helps investors to make the most of the prevailing market scenario. ELSS acts as an investment shield against the volatility of the investment market as it has a provision that helps to lessen the ill-effect of the market and allows investors to draw out benefits from both highs and lows of it.
  • Diversification of Portfolio: Besides its tax-saving aspect under sec 80C of the Income Tax Act, ELSS offers the investors the feature to team up with PPF to earn better returns. The combination of ELSS and PPF extends the opportunity to earn more at a stable rate and also diversifies the portfolio with a great mix of equity and debt. The ELSS ensures the earning portion owing to the equity composition while PPF takes care of the stability as it is government-backed security.

Develop a steady investment approach and increase your opportunity to earn better returns by investing in ELSS funds. Learn how to make the most of your ELSS investment by availing the best guidance of our expert fund managers.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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