What is ELSS? – Invest in Best EQUITY LINKED SAVINGS SCHEME Funds & Save Taxes-ELSS FUNDS

ELSS

WHAT IS AN ELSS FUND?
ELSS Funds are a type of mutual fund that is eligible for TAX DEDUCTIONS under Section 80C of the Income Tax Act of 1961.. Under Section 80C of the Income Tax Act, investors can save up to 1.5 lakh in taxes by participating in such a plan. Many new investors choose ELSS funds for their combined benefits of tax savings and asset class exposure to equity.
In ELSS, 3 years of locking period from the date of investment. One is free to sell them when the lock-in time is up or to keep holding onto them..

HOW DOES AN ELSS FUND FUNCTIONS?
An ELSS fund works by investing the money of the investor in equity and equity-related instruments. The fund manager of the ELSS fund will then use the money to purchase stocks, bonds, and other securities. The fund manager will then monitor the performance of the investments and make adjustments as needed. The returns from the investments are then passed on to the investor in the form of dividends or capital gains. The minimum investment amount in a scheme is Rs.500.

WHAT IS THE BENEFITS OF ELSS SCHEMES OR WHY CHOOSE ELSS?
The main advantage of ELSS schemes over other investment options is that they offer the highest tax savings under Section 80C of the Income Tax Act. ELSS schemes also offer higher returns compared to other tax-saving investments such as PPF, NSC, etc. Additionally, ELSS schemes have a shorter lock-in period of three years compared to other tax-saving investments, which have a lock-in period of five to seven years.

TAX ON ELSS FUNDS?
When calculating income taxes, capital gains from ELSS are treated similarly to profits from equities instruments. If long-term capital gains (LTCG) exceed 1 lakh in a fiscal year, they are subject to tax at a rate of 10% on the excess.

If you are not willing to take on more risk, it is best to invest through a SIP. You have the option to invest in a fund through all business cycles when you use a SIP. This makes it easier for you to gain from buying fund units during market cycles.