ELSS (Equity Linked Saving Scheme) is a mutual fund tax saving scheme which provides tax relief benefit to one and all under section 80C (including HUF) upto a limit of Rs 1.5 lacs.
6 Reasons to Invest in Tax Savings Mutual Fund
Low lock in period
It is a scheme which has lock in period of 3 years. Lock in means one cannot withdraw money before the maturity date. There are other tax saving funds such as PPF which has lock in period for 15 years, National saving certificate has a lock in period of 6-8 years.
Flexibility in investment period
In ELSS it is not necessary that one has to redeem the investment after the lock in period of 3 years. One can stay invested even after the lock in period.
Potentially higher market linked returns
ELSS gives potentially higher returns than the investments that offer fixed returns. Investments that offer fixed returns beat inflation but in turn they offer less effective returns. While ELSS has a benefit of higher return but that comes with higher risk.
Dividends & Growth
An investor has the option to select either Dividend or Growth option depending on his needs and assessment of his financials.
High level of transparency
Asset management companies (AMC) manages mutual funds including ELSS. AMC provides all the important information about the funds. Information such as expense ratio, NAV, asset size etc. is provided. This gives a transparent picture of ELSS to the investors. Direct Investments are recommended cause they offer less expenses to the fund and in turn a big higher returns.
SIP investment option in ELSS
ELSS gives you SIP option which allows you to invest systematically at fixed interval of time. Due to SIP, one can develop a habit of saving a fixed amount at regular interval. SIP also gives the benefit of rupee cost averaging.
Also Check: Best Tax Saving Mutual Funds