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What is ELSS? Check how it is better for saving taxes than PF, PPF and other schemes

1 month ago 32

Equity Linked Savings Schemes (ELSS) are fast gaining popularity as an investment option. ELSS are referred to the mutual fund investment schemes that help in saving Income Tax. This is the reason they are called tax-saving funds. ELSS invests up to 65 percent of the money in equity-linked securities such as shares and debt instruments.

The returns offered by ELSS range between 15 percent to 20 percent, more than other tax-saving instruments that give 7-10 percent returns. Taxpayers are able to invest up to Rs 1.5 lakh in ELSS and claim it as a deduction from their taxable income. No upper limit has been set to the amount of investment you can make. You can also earn good returns by investing in it as the corpus also includes fixed income assets.

Lock-in period is one of the main benefits of investing in ELSS. At three years, its lock-in period is less than other tax-saving instruments. In PFs, the lock-in period can go up to 15 years, while in case of retirement funds, the period can extend till retirement. It should be noted that three years is only the minimum lock-in period in ELSS, you can keep your money in the mutual fund even after that period.

As ELSS is a short-term investment scheme, the gains more than Rs 1 lakh on it will be taxed at a rate of 10 percent. In case of long-term investments, the rate is 15 percent.

Have a look at some of the advantages of investing in ELSS:

Transparency is assured to the investors as the mutual funds are required to disclose information under the norms of Securities and Exchange Board of India (SEBI).
ELSS comes with a Systematic Investment Plan (SIP) option, so salaried individuals are able to keep investing their monthly income into this mutual fund.
You can invest your money in diverse schemes that are exposed to different industries to ensure more security in the market.
There are various options for saving taxes under Section 80C of the Income Tax Act. Individuals who are eligible for paying taxes can save as much as Rs 1.5 lakh if they make investments in schemes that are launched specifically for this purpose. These options include fixed deposits (FDs), Public Provident Funds (PPF), Provident Funds (PF), government schemes, and ELSS.

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