Equity linked savings schemes (ELSS) is a new taxation scheme by the government under mutual funds to influence long-term equity investments. The purpose of ELSS is only to increase the equity contribution by sanctioning the tax-deductible scheme in mutual funds. With less share of tax, investors invest a large part of their income inequities that further helps them in multiple benefits.
If you are planning to invest then ELSS Mutual funds are the best choice. Well, before getting to know about its investment benefits, first you should need to understand what ELSS is and how to invest in it?
What is ELSS?
ELSS stands for Equity linked savings schemes. It is just another way of saving like Mutual funds. Unlike regular savings plans, ELSS focuses on the stock market. With the ELSS mutual funds scheme, you get 3 years, and during this period you cannot sell the investment. It is fix investment which means you cannot use the money for 3 years.
How ELSS work to deduct tax?
The maximum ELSS investments are Rs. 1.5 lakhs for a year meet the requirements for income deduction under section 80C, income tax act. This means you can deduct the ELSS amount from your taxable income.
Why ELSS is best for investment?
The other tax-saving schemes like employee provident fund (EPF), public provident fund (PPF) and NSC certificates are ways to save tax, but ELSS offers you best return and benefits as compared to other plans such as:
- Short time-period
ELSS comes under a short period, which is for 3 years only. Whereas the other schemes like EPF PPF require a long-time period of 5-15 years. Therefore, ELSS is quite a better option to invest.
- Get higher returns
As per 80C investment norms, people claim a 6-8% return on investment on FDs like PPF and more. But in ELSS you have the power to get higher returns around 12-14%. However, it depends on the portfolio of investors.
- Easy investment plan
As compared to Mutual funds schemes, PPF, EPF. ELSS is an easy way to invest for a short time. All you need to do is. Put your money via SIP or lumpsum. You need to lock it for 3 years, if you need to sell you can do it online. After the period, the funds are transferred into your account.
- ELSS offers best post-tax-returns
With ELSS mutual funds, the return of RS.1, 00,000 is exempted from the income tax. With long term ELSS gains, 1 lakh taxed as 10%.
- ELSS offer Switch funds
With ELSS you have the option to expand your portfolio. It will offer you the best taxation system along with fixed deposit plans to reduce the income tax. Moreover, with ELSS, you have other investment parts such as debt and equity.
Saving or investment is important for anyone. But investing in the right method is important to avail maximum returns. ELSS is the best option for saving, investing, and reducing the income tax. For more detail, you must contact with mutual funds experts.