Complete guide to ELSS Investment

Tax planning may give the impressionof being a mind-numbing exercise requiring lot of efforts that may make an investor nervous at the first look. However investing in Equity Linked Savings Scheme (ELSS) offers a simple way to get tax benefits and at the same time get achance to gain from the potential of Indian equity markets. Simply put, ELSS is a type of spread equity mutual fund which is capable for tax exemption under section 80C of the Income Tax Act.It comes with the undistinguishable advantage of Capital Appreciation and Tax Benefits. It has a lock-in period of three years. But if you continue with your investment even after lock-in period of 3 years, it will help you create wealth in the long-run.

Advantages of Investing in ELSS:

  • Growth potential of equity
  • Capital gains and share income are tax free
  • 3 years lock-in period (lowest related to other select tax saving options)
  • Clubs financial planning with tax planning
  • Inculcate saving habit
  • Opportunity to invest in equity while saving

ELSS vs. Other Tax Savings Products:

Otherimplements such as Public Provident Fund (PPF), National Savings Certificates (NSC) and Bank Fixed Deposits produce lower inflation-adjusted revenues as related to ELSS .ELSS has beaten these implements by a much broader margin.

Table 1: Interest rates/ returns  
Public Provident Fund 8.70%
National Savings Certificates 8.50% for 5-year maturity

 

8.80% for 10-year maturity

Over 5-year banks’ fixed deposits 8.50-9.05%@
ELSS* 22%**
Inflation 6.19%^

How to buy ELSS funds online?

So if you want to buy ELSS Investment Fund than you must complete the online registration process using Aadhaar-based KYC to complete the registration process through an authorized channel. Once online registration is complete, you will receive a pre-filled bank order on their registered email ID and a final email from NSE for confirming FATCA details. You can use KYC documents such as PAN, etc. to complete their regisstration.

Is ELSS a good investment?

ELSS makes a very good investment option for first time investors. The main reason being, if you are investing in ELSS via SIP, then you can start with as small an amount as Rs 500/month. Compared to the other tax savings selections, ELSS is one of the best performers.

Can You withdraw money from ELSS before 3 years?

So if you want to cash your whole units at once, then for a yearly SIP your whole units will get free at the end of 4th year from the date you started SIP in ELSS schemes. Neither can you withdraw nor can you switch funds from ELSS schemes before end of 3 years from the date of investment.

Is ELSS good for long term investment?

But it is an important one, not just for ELSSs but for all tax-saving investments. It is well to invest regularly through an SIP or STP in a tax-saving mutual fund to maximize returns. So don’t judge schemes on short-term act: This point holds true for all the mutual fund schemes and not just ELSS.

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