ELSS Mutual Funds
Here are eight ELSS Tax Saver Mutual Funds-related items you should know before investing if you're considering doing so.
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Equity-linked Savings Schemes (ELSS) Mutual Funds Benefits: The purpose of investing is to increase wealth. If you can reduce your taxes in the process, all the better. One investment that enables you to accomplish these aims is an equity linked savings scheme, or ELSS.
A high-return Equity Fund that also reduces taxes is called ELSS. Through your ELSS investment, you may be eligible for tax refunds of up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act. Additionally, the programme often provides returns that outperform inflation and are risk-adjusted, coming close to matching those of comparable equity schemes. These are a few of the characteristics that make ELSS one of the best investing alternatives for reducing taxes.
Here are eight things to consider before investing in an ELSS fund if you are considering doing so.
1. Lock-in period
For three years or 36 months after the acquisition of the Mutual Fund units, investments in ELSS are frozen. Only when this lock-in period is over are your units eligible for redemption or sale. For instance, you began a SIP in April 2020 for three years with Rs 5000. The properties bought on April 1st, 2020, will be locked until March 31, 2023. Similar to this, the units permitted by the May 1, 2020 instalment can be sold until April 30, 2023. The last instalment of the 3-year SIP in ELSS will assign you units on March 1, 2023, therefore if you want to redeem all of the units earned throughout the SIP term at once, you will need to wait until March 1, 2026.
2. Investment Limit
The amount that may be invested in ELSS is limitless. However, under Section 80C of the Income Tax Act, only investments up to Rs 1.5 lakh would be eligible for tax breaks each financial year.
3. Systematic investment
You may invest methodically with ELSS, just as with other Mutual Fund plans. You can begin a SIP on a monthly basis in an amount that meets your needs for tax reduction. You benefit from a range of market circumstances, which over the long run helps to average out the cost of your assets.
4. Lump sum investment
You have the choice to invest a lump sum using ELSS. For instance, if you wish to invest Rs 1.5 lakh in ELSS, you can either do it all at once or over the course of the financial year by making monthly instalments.
5. Top-up option available
You can increase your investment with a one-time lump sum payment if you have begun an ELSS SIP but think the cumulative amount is insufficient. Another advantage of ELSS is this flexibility in terms of investing options.