You must have heard about ELSS Funds already. What do you think these funds actually are? ELSS Funds are basically Equity-Linked Savings Schemes that you can invest in. These are specific mutual funds where you can get tax breaks while also aiming at tapping into the future potential of the equity market as well.
ELSS is the equity based mutual fund which helps you save taxes while also enabling wealth creation. There are tax exemptions which are applicable on such investments under Section 80C. You can get tax benefits on ELSS Funds investments up to Rs. 1,50,000 under Section 80C for a particular financial year.
ELSS will be an investment where you get ample scope for growing wealth by making investments in the mainstream equity market. The capital gains (long-term) from ELSS Funds will be free from taxation and there is only 3 years as the period for lock-in. Also, you can choose options for dividend payouts, thus getting some good gains in the lock-in duration. You may also make an investment through an SIP (Systematic Investment Plan) and organize your entire gamut of tax planning activities.
Investments in mutual funds are always subject to market based risks. You can also get an opportunity to grow wealth through equity market investments. There are tax-free long-term capital gains with a short lock-in period. There is also the dividend payout option available and systematic investment plans can also be availed. Any payment of dividend will be made from the net asset value (NAV) and the payment will be based on trustee approval and also the availability of a surplus amount that can be distributed. Make sure that you carefully go through all the documentation since there are quite a few risks attached to mutual fund investments.
ELSS funds will have returns which are linked to the market and are not assured. The minimum investment that you can put in is Rs. 500 while there is a 3-year lock-in period as mentioned. There is no cap on the maximum amount that can be invested. There are tax benefits under Section 80C as mentioned previously. There is no tax on capital gains and dividends. The risk levels are higher but returns can be decent.
You should always keep in mind that research and homework are vital whenever you are considering ELSS investments. You should always analyze the performance of a fund over the long haul before you make any investment. Always scrutinize aspects like the strategies and approaches towards investments that are advocated by fund managers along with the overall portfolio of the fund in question and its expense ratio too. Also make sure you know how market volatility has impacted the fund’s performance and returns in previous years.