What are the advantages of investing in an ELSS
Feb 19
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Tags: Wealth Management, Investment Lesson, Mutual Funds, Stock market, Budget, Finance, Investing, Personal Finance, Investment
Equity-Linked Savings Scheme (ELSS) is a type of mutual fund that offers tax benefits under Section 80C of the Income Tax Act, 1961. Here are the key advantages of investing in an ELSS:
1. Tax Benefits
You can claim a deduction of up to ₹1.5 lakh in a financial year under Section 80C.
Helps reduce your taxable income, leading to potential tax savings of up to ₹46,800 (for those in the 30% tax bracket).
2. Shortest Lock-in Period Among 80C Investments
ELSS has a 3-year lock-in, which is the shortest compared to other 80C options like:
PPF (15 years)
NSC (5 years)
Fixed Deposits (5 years)
3. Potential for Higher Returns
ELSS primarily invests in equities, which have the potential to generate higher long-term returns compared to fixed-income instruments like PPF or NSC.
Historically, ELSS has delivered 12-15% average annual returns over the long term.
4. Flexibility in Investment
You can invest via lump sum or SIP (Systematic Investment Plan), making it easier to manage cash flows.
SIPs also help with rupee cost averaging, reducing market timing risks.
5. Long-Term Wealth Creation
Since ELSS is equity-based and has a lock-in period, it encourages long-term investing, which can help in wealth accumulation.
6. No Maturity Period, Unlike Traditional 80C Investments
Unlike PPF or FDs, ELSS has no fixed maturity. After 3 years, you can choose to stay invested for more compounding benefits.
7. Tax-Efficient Returns
Long-Term Capital Gains (LTCG) up to ₹1 lakh per year are tax-free.
LTCG above ₹1 lakh is taxed at 10% without indexation, which is still more efficient than many other investment options.
8. Professional Fund Management
ELSS is managed by professional fund managers who actively allocate funds in high-potential stocks, maximizing returns.
Who Should Invest in ELSS?
✅ Investors looking for tax savings with high growth potential.
✅ Individuals with a long-term investment horizon.
✅ Those comfortable with market fluctuations and equity exposure.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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