What is ELSS Fund?
By admin_mutual | Jan 10, 2023
It is a fact that investors perpetually seek out investment opportunities that will enable them to build wealth, receive consistent returns, and/or reduce their tax burden. Although there are many investment plans on the market, the majority of them offer returns which are taxed in accordance with income tax regulations. ELSS funds can help in this situation. Equity mutual funds that save on taxes are known as ELSS or Equity Linked Savings Scheme Funds.
An equity open-ended mutual fund known as an Equity Linked Savings Scheme (ELSS) invests primarily in stocks and other securities that have an equity component. According to Section 80C of the Income Tax Act of 1961, they fall under a special category of mutual funds that are eligible for tax deductions. They are therefore frequently referred to as mutual funds that save on taxes.
Investment in ELSS Mutual Funds: What are the Benefits?
Mutual funds that offer ELSS offer the chance to reduce taxes while generating respectable returns. A minimum of 80% of the assets of the scheme are invested by these funds in stocks. As a result, their potential returns are directly correlated with the performance of the stock market. If you wish to make investments for long-term objectives – such as building a retirement corpus or purchasing a new home, this might be a good option.
An annual tax deduction of as much as Rs. 1.5 lakhs is available on investments. A three-year lock-in period is also required for these funds. This has got to be among the tax-saving investment options with one of the shortest lock-in periods available. ELSS funds are a well-liked investment option among investors as a result of all these advantages.
What time of year is ideal for ELSS investments?
When the fiscal year nears its end, many investors purchase equity-linked savings scheme funds in order to reduce their tax liability. This approach might not be regarded as wise. A crucial factor, when investing in such kinds of funds, is certainly – tax savings. But that must be the main justification for thinking about investing in them.
Investing with a long-term perspective is the most ideal way to maximize returns on such funds. Decide on your investment objectives at the start of the year and make the appropriate investments using SIPs (Systematic Investment Plans). Consistent year-round investing can help expose you less to volatility in the market and aid you in accumulating wealth over time.