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Why ELSS funds are prominent tax saving investments option?

Image for ELSS funds for Tax Saving Investment

When it comes to tax saving investments options, salaried people usually prefers equity - linked savings scheme i.e. ELSS than other available investment options. The main reason behind its popularity is that there is no limit set for an investor while investing under ELSS. Such tax planning mutual funds schemes emerge as an innovative approach which helps tax payers to save taxes up to Rs 1.5 lakh under Section 80C of Income Tax Act. Here are some more reasons that clearly signify why ELSS is considered to be a good option for tax saving investment for many investors:

Have Least lock-in period:- Tax saving mutual funds schemes like ELSS belongs to a category which has minimum lock-in period (usually 3 years). This mandatory lock-in period is very lower than other tax saving avenues like PPF which comes with a compulsion lock-in period of 15 years.

Raises Capital value:- By investing on ELSS funds, you can create wealth by just linking it to your long term financial goals. You only need to choose a decent growth option from several available options. This strategy helps investors to focus on their investment objectives. In ELSS investment, investors also get provision of holding it after the compulsory lock-in period for future saving if it is performing well in a market.

Provides good tax saving option:- ELSS funds offers attractive tax saving options to every tax payer. You as an investor can save up to Rs 46,350 on investment of Rs 1.5 lakh, if you fall under 30% tax bracket. There is no need to worry if you falls under 20% tax bracket because still you can save tax for up to Rs 30,900 in investment of 1.5 lakh when you claim it for deduction under section 80C.

Funds available in categories:- Many people thinks that it is risky to invest in ELSS funds as such tax saving mutual funds invest mostly in stocks. Keeping this fact in mind, these schemes are designed on the basis of small-cap, middle-cap and large-cap so that it can meet one’s risk taking capacity. Such categorized funds availability option offers flexibility to an investor and encourages him or her to take the decision for investment despite knowing the volatility of stock market. However, it is better to take financial advice from your advisor before investing on any fund as both risk & returns varies according to plan.

Tax Free Proceeding:- When you invest money on any ELSS scheme, you can avail your return totally tax free if it is withdrawn after the successful completion of mandatory 3 year lock-in period. Maturity in ELSS proceeds totally tax free. In such scheme, investors also get option to redeem their money after a year by exchanging it in the secondary market.

Offers maximum Returns:- Schemes which comes under ELSS category; offers higher returns to the investors as compared to other available tax saving schemes. However, it is recommended for investors to invest in tax saving mutual funds schemes for a period of at least 5 to 7 years in order to assure maximum compounded return on their investment.




Mr. Ajay Kumar Jain, M.Sc, Chairman And Managing Director
Being the Chairman And Managing Director, he focuses on holistic investment planning and wealth management and tries to make investment planning simpler for retail and HNI investors. Investor education is one of the prime things that Mr. Ajay Jain focuses on as he believes financial education is the foundation of successful investing. With over two decades of experience, Mr. Jain has made a mark in the Indian mutual fund industry due to his compassion and sheer hard work.

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