Equity Linked Saving Scheme (ELSS)- Overview

ELSS is the part of Mutual Fund Investment. Equity Linked Saving Scheme(ELSS) directed as per the ELSS mutual fund guidelines issued by CBDT under section 80C of the Income Tax Act 1961. The purpose of recommending ELSS is to encourage investments in equities by providing tax rebate or exemption.

The maximum Tax amount up to Rs. 1.5 Lakhs (for the current financial Year), is to be exempted by investing in ELSS scheme.

Investors who invest in ELSS funds are investing in a fund where minimum part of their investment means 80% of the invested amount can be in equities and equity-related securities. If we are comparing the return on investment(ROI), ELSS gives the higher performance than other tax saving instrument.

ELSS investments come with a locking period of three years, where the long-term capital gains and dividends are tax-free.

The lock-in period is only of three years making it the best option with the shortest lock-in period in tax saving options/scheme.

Benefits OF ELSS Investment

1. Tax exemption: Investor by investing Rs. 1.5 Lakhs (current financial Year) in ELSS mutual funds are eligible for tax exemption under SECTION 80C.

2. Minimum Lock-in period: ELSS mutual funds come with the lock-in period of three years. ELSS has the least lock-in period compared too other 80C options.

3. Tax-free Returns and dividends: It is the fact that there are the limited tax saving instruments like PPF, ELSS, ULIP and tax-free bonds. Each instrument has different benefits with some limitations.  Corporate Fixed Deposit, NSC, Bank FD, Post office scheme, etc. all these tax saving options’ returns are taxable based on individual tax slab that means whatever the interest you get in that year will be club in income slab. Let's have a look at the interest earned by Public Provident Fund(PPF); Returns are tax-free, but with a limitation that, there is 15-year lock-in period, means you cannot withdraw (apart from certain exemptions to withdraw in between). The best tax saving investment option that provides tax-free returns and high return on investment for a short period is ELSS Mutual funds.

4. Growth with Good Returns: Since an ELSS mutual fund invests in equity related instruments so these schemes would help you to grow your invested money with better returns when the stock market grows over a period.

Top ELSS Mutual Fund (As on 6th Oct 2017)

1. Axis Long Term Equity Fund (G): 

1 Year return- 15.3%, 3 Year return- 14.6%, 5 Year return- 22.2%.

2. Kotak Tax Saver - Regular (G):

1 Year return- 14.7%, 3 Year return- 15.4%, 5 Year return- 15.9%.

3. Reliance Tax Saver (ELSS) (G):

1 Year return- 18.8%, 3 Year return- 13.1%, 5 Year return- 20.8%.

4. IDFC Tax Advantage (ELSS)-RP (G):

1 Year return- 25.5%, 3 Year return- 16.5%, 5 Year return- 20.9%.

5. Franklin India tax Shield(G): 

1 Year return- 10.2% Year return- 13.1%, 5 Year return- 18.1%.

6. HDFC Tax Saver (G): 

1 Year return- 16.5%, 3 Year return- 10.4%, 5 Year return- 16.3%.

Hope you find the article helpful.

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Posted By - +Nitin Gautam +LIVE VIAR +ASP.NET SOLUTIONS 

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