Mutual funds are becoming increasingly popular among investors. There is less risk in investing in these funds. At the same time, it is also the best option for those who have less understanding of the market. If you are planning to invest in a fund where you get better returns and tax benefits along with less risk, then experts say that an Equity-Linked Saving Scheme (ELSS) can be the best option for you.
What are ELSS Mutual Funds?
ELSS funds generally invest in the stock market by diversifying investments in companies from different sectors. In this way, diversifying investments reduces risk and increases the potential for higher returns in the long term. ELSS funds offer high returns as well as tax benefits to investors. However, there are some risks associated with these funds.
ELSS mutual fund - The best option for investment?
ELSS offer higher returns compared to other mutual funds. Along with this, by investing in these funds, investors also get the benefit of tax savings like the Public Provident Fund (PPF), and National Saving Certificate (SSC). The lock-in period of ELSS mutual funds is three years. This is the shortest lock-in period of any tax-saving investment option. Other investment options have a lock-in period of up to 5 years. If investors want, they can invest in it for 10 to 15 years. In ELSS mutual funds, investments are made in the stock market under the supervision of professional fund managers. They study the market with their expertise and skills, due to which investors get high returns at low risk.
How to invest in ELSS funds?
You can invest in ELSS Funds via –
Online mutual fund platform
Through Demat account
Through the registrar
Through an agent
ELSS tax norms
ELSS is the only category in mutual funds in which investors get tax benefits. ELSS investors can save tax up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961. But if you receive returns of more than Rs 1 lakh, you will have to pay tax. These taxes are also of two types. The first is short-term capital gains tax which has to be paid if the investment remains for less than 1 year. This tax is 15% of your return. The second one is Long Term Capital Gain Tax which has to be paid on the returns received after staying invested for more than 1 year. This tax is 10% of your return.