The Equity Investing Savings Scheme, or ELSS, is a type of mutual fund (MF) that was developed specifically to save you money on taxes. The investments you make in an ELSS are tax-deductible under Section 80C. It also offers the possibility of long-term capital growth.
An ELSS fund manager invests in a diversified portfolio that consists mostly of high-risk equities and equity-related securities with the potential to produce large returns. Because it is an Equity Investing fund, the scheme's returns are set by the market.
In your hands, the returns from an ELSS fund are tax-free. Long-term capital gains from an ELSS are also tax-free. This is due to the fact that equities held for more than a year are exempt from taxation. Because an ELSS comes under section 80C, you can deduct up to Rs 1.50 lakh from your gross total income from your investment. Look for some exclusive investment Products for tax saving.
In comparison to other tax-saving vehicles such as the Tax Saving Fixed Deposit, which has a lock-in duration of five years, and the NCS, which has a lock-in term of six years, an ELSS has a three-year lock-in period.
When compared to other passively managed Asset allocation classes, an ELSS fund that invests in equities and is dynamically managed by a professional fund manager has the potential to produce long-term financial gains.
The Systematic Investment Plan (SIP) is a mutual fund investment vehicle that allows investors to invest in modest amounts on a regular basis rather than in large lump sums. SIPs (Systematic Investment Plans) are a good way to plan ahead and invest in ELSS.
It's important to remember that the performance of the Equity Investing market determines the ELSS schemes' returns.