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Mutual funds are now being regarded as one of the most preferred options of Indian investors owing to their higher returns with tax benefits that come along. ELSS Mutual Funds help reduce the tax liability of investors to a great extent, simultaneously pushing the investment to grow over a period of time.
What are ELSS Mutual Funds & how are they beneficial?
ELSS Mutual Funds (Equity-Linked Savings Scheme) are one of most chosen equity mutual fund schemes which invest in equity markets and are widely used by investors to save tax while parking their money.
One of the major benefits of ELSS investment is a tax deduction of a maximum of Rs 1.5 lakh per annum under Section 80C of the I-T Act. Even though one can invest as low as Rs.500 in ELSS, investments of upto Rs.1.5 lakh are eligible for tax benefits under section 80C. These tax saving ELSS funds come with a lock in period of three years. Moreover, capital gains above Rs. 1 lakh are taxable at the rate of 10%.
ELSS Mutual Funds also offer a better chance of higher returns since they invest in equity instruments, though they also come with the higher risks associated with equity instruments. In a growing economy like India, it is good to have an exposure in Equity Mutual Funds for higher returns and ELSS Funds are one of the best ways to do that since they have an added advantage of tax savings.
