ELSS Fund - Tax Saving Mutual Fund

ELSS Fund - Tax Saving Mutual Fund

What is it ?

An ELSS is an Equity Linked Savings Scheme, that allows an individual or HUF a deduction from the total income of up to Rs. 1.5 lacs under Sec 80C of Income Tax Act 1961.

Thus if an investor was to invest Rs. 50,000 in an ELSS, then this amount would be deducted from the total taxable income, thus reducing the tax burden.

Usually, Taxpayers choose the path of traditional LIC policy to complete the 80C limit but remember this is not a good way to go ahead from Long Term Investment point of view. One should analyze the need for insurance and if it is required always go for Term Insurance.

Advantages

These schemes have a lock-in period of three years from the date of units allotment. After the lock-in period is over, the units are free to be redeemed or switched. ELSS offers both growth and dividend options. Investors can also invest through Systematic Investment Plans (SIP), and investments up to ₹ 1.5 lakhs, made in a financial year are eligible for a tax deduction.

Lock-in periods in these schemes are less compared to any available options like PPF, FD, NSC, etc.

If we talk about returns, ELSS performance over a period is not far above any traditional instrument available.

As you might be aware, Capital Gains from Debt Mutual Funds (which are more suitable for low-risk takers) are taxed as regular income, whereas Long Term Capital Gains booked in Equity Oriented Funds are tax-free up to Rs. 1 Lakh per fiscal year. Here ELSS comes with a big advantage.

Top Performing ELSS Mutual Funds in 2021

1. Canara Robeco Eqt Tax Saver Fund
2. Mirae Asset Tax Saver Fund
3. DSP Tax Saver Fund

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