Alt equity linked savings scheme

Equity Linked Savings Scheme

ELSS – Tax savings + Effective Investment

ELSS is an instrument, which owing to its exposure to the equity markets, provides investors with stronger returns compared with traditional tax savings instruments such as PPFs and bank FDs. Therefore, these higher returns from ELSS help the investors cover themselves up against the ever-growing inflation, which helps them maximize their savings better for their future.

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Following are some of the key features of ELSS investment:

Lock-in period The lock-in period for investing in ELSS is 3 years, which is the lowest among all other popular tax savings instruments.

Charges When you invest in ELSS, you just pay one fee –fund management fee, popularly known as expense ratio, which is generally capped at a maximum limit of 2.5% and is a calculated as a percentage of your overall investment demand. There are many ELSS funds, which even operate at an expense ratio of 1.25%.

Tax Savings The best part about investing in ELSS is that you can avail tax exemption of up to Rs. 1.5 lakhs under the overall limit u/s 80C of the Income Tax Act. When you invest in ELSS, your returns and the amount you would receive on maturity are completely exempt from tax. In case you have opted for dividend option, the best part is that the dividends that you would receive are also completely exempt from taxes.

Returns Tracking the returns on your investment is much easier when you park your money in ELSS. ELSS funds have yielded an average annual return of around 12-14% in the past five years, with the top performing funds yielding around 19%.

Thus, based on the points mentioned above, ELSS becomes a potent investment cum tax savings option u/s 80C.Click to know more about the best tax saving investment options.