ELSS Mutual Funds [Equity Linked Savings Scheme] save Tax While Creating Wealth:
Do you fall under the Income Tax slabs and Wants to save your Tax, looking for ideal solutions to save your money from Income Tax?
Then you must try investing in the ELSS funds also know as Tax saving funds.
ELSS [Equity Linked Savings Scheme] funds meaning and what are ELSS funds? An Equity Linked Savings Scheme (ELSS) fund is an open-ended Equity Mutual Fund that helps you in tax saving (best tax saving mutual funds) and provides an opportunity for you to grow your money.
- ELSS mutual funds are qualified for tax exemptions under section (u/s) 80C of the Indian Income Tax Act and people can claim the same by starting an ELSS fund and file ITR.
- These mutual funds invest 65% of the money in equity-related instruments that are notified to avail tax benefits.
- Investing in these kinds of mutual funds provides a tax benefit to investors u/s 80C, which is capped to an amount of Rs 1.5 Lakhs which is the maximum amount.
To invest in these funds you can either visit the mutual fund company website register online and investor you can contact their fund manager to invest in their mutual fund schemes.
Also, there are third-party apps you can try for investing in these types of funds like coins by Zerodha, Mycams, ET money, and other apps.
ELSS mutual funds are a type of diversified equity mutual fund which is qualified for tax exemption under section 80C of the Income Tax Act,
These funds help with capital appreciation and tax benefits.
ELSS funds are available with a lock-in period of 3 years which is 5 years for bank funds and Post Office time deposit of 5 years.
Why in ELSS mutual funds are better than other funds:
- The main reason is tax saving, ELSS funds help in tax saving, ELSS mutual funds are qualified for tax exemptions under section (u/s) 80C of the Indian Income Tax Act and people can claim the same by starting an ELSS fund and file ITR.
- Investing in these mutual funds provides a tax benefit to investor’s u/s 80C, which is capped to an amount of Rs 1.5 Lakh the maximum amount.
- If you compare ELSS mutual funds invest around 65% of the money in equity-related instruments that are notified to avail tax benefits also the returns from ELSS funds can be higher than the bank returns based on the market situation during that time period.
- Lock-in Period: We have seen that for good returns, we have to keep the funds for long-duration whether its other mutual funds or bank funds but in ELSS funds it’s just 3years. Even a few banks provide Tax saving funds but the lock-in periods for a few banks are more than 3years like 5years or more years.
- ELSS funds have a short lock-in period of 3years compared to the maturity period of NSC which is 6 years and 15 years for PPF.
- ELSS funds earning potential is high as these funds are equity-linked schemes.
- When investing in ELSS funds the investor can also opt for the dividend option to get some gains during the lock-in period.
In ELSS funds the investors can opt for ELSS SIP meaning: Systematic Investment Plan [SIP], or if the investor wants to invest a large amount once then they can opt for Lumpsum investment or One-time investment.
Now let’s see a few disadvantages of ELSS funds:
The ELSS funds risk factor is comparatively very high wherein it is very less for NSC and PPF.
Now let’s see how to invest in ELSS mutual funds:
Before investing search online for the top 10 ELSS funds and compare the top ELSS funds in 2020 to invest in based on their current performance and invest accordingly.
Top Best ELSS Funds to invest in 2020 as per Cleartax data:
|Fund Name||3-year Returns|
|Mirae Asset Tax Saver Fund||15.88%|
|Axis Long Term Equity Fund||15.88%|
|Aditya Birla Sun Life Tax Relief 96||11.47%|
|DSP Tax Saver Fund||10.68%|
|Kotak Tax Saver||11.98%|
|Canara Robeco Equity Tax Saver Fund||12.79%|
|Motilal Oswal Long Term Equity Fund||12.01%|
|UTI Long Term Equity Fund||9.84%|
|ICICI Prudential Long Term Equity Fund||9.52%|
|SBI Magnum Tax gain Scheme||7.61%|
E-filing the ITR is not so hard. if you don’t know then check about the steps to file ITR online.
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