These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961. E.g. PF, PPF, LIC, ULIPS, Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits.
Equity Linked Saving Schemes (ELSS): ELSS (Equity Linked Saving Schemes) is a mutual fund similar to any diversified equity mutual fund that routes your investmentsinto equity markets. However, it stands apart from a regular mutual fund in one major way. ELSS (Equity Linked Saving Schemes) carries a tax benefit on the amount invested, and therefore you have to lock-in your investment in an ELSS for three years.
As the name of the scheme very clearly suggests, it is a tax saving scheme that’s linked to equity. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.Few most important features of Equity Linked Saving Schemes (ELSS).
Features of ELSS (Equity Linked Saving Schemes):
Why ELSS Equity Linked Saving Schemes:
1. Investments in ELSS under Dividend Payout Option have the advantage of getting TaxFree gains even during the lock-in period of 3 years.
2. Lowest Lock-in period of just 3 years, comparing favourably with maturity period of NSC (6yrs) and PPF (15 years).
3. Minimum investment is only Rs.500. very low entry barrier.
4. Investments in ELSS (Equity Linked Saving Schemes)can be done through Systematic Investment Plan.
5. Historically, provided better returnsthan NSC, PPF and ULIPs.
6. Profits earned after the Lock-in Period is completely Tax-Free.
7. Due to its 3 year lock-in period, the Fund Manager has the freedom to invest in Fundamentally Strong Shares with huge future potential and can afford to 'wait' to unlock the value.