Equity Linked Saving Schemes (ELSS)


Investors are well aware of instruments like PF, LIC, PPF, ULIPS, ELSS or Equity Linked Savings Schemes, as they offer rebate U/S 80CC of the IT Act. Amongst all these instruments ELSS stands out as a smart and efficient way of saving tax and creating wealth. It is worth noting that none of the other tax saving instruments have ever delivered double-digit returns. Whereas, historically ELSS has given returns in high double digits.

Equity Linked Saving Schemes (ELSS) is Similar to any diversified equity mutual fund that invests in equity markets. In nutshell, ELSS is a closed ended mutual fund that offers tax benefits plus capital appreciation. ELSS schemes are generally locked in for a period of 3 years from the date of investment.

Features of ELSS (Equity Linked Saving Schemes):

  • Normally a closed ended diversified equity mutual fund.
  • Lock in period is if 3 years and premature withdrawals are not allowed under any circumstances.
  • Provides capital appreciation and tax benefits.
  • An investor can invest in ELSS through the sip route as well. However, the point to be noted is that in SIP, lock in period of 3 years is calculated from the date of each SIP investment and not from the date of start.
  • Minimum investment amount in ELSS for a lump sum is Rs. 5,000 and for SIP is Rs. 500.
  • Investors can opt for dividend option and get regular yearly dividends.

Why invest in ELSS

  • Returns (including dividends) under sec 80CC is all tax free.
  • Lock in period of NSC is 6 years, PPF is 15 years, whereas, lock-in period of ELSS is 3 years.
  • Historically ELSS has given better returns than PPF, NSC, and ULIPs.
  • All returns are tax free after 3 years.
  • A 3-year lock in period enables the fund Manager to invest in fundamentally strong shares with huge future potential and upside.

Top ELSS Schemes

Scheme (Returns as on Sep 19, 2017) Axis Long Term Equity Fund (G) Franklin India Tax Shield (G) ABSL Tax Relief 96 (G)
3 Months 7.2% 5.0% 8.1%
6 Months 17.2% 10.3% 17.8%
1 Year 20.2% 14.3% 22.4%
2 Years 14.0% 13.2% 17.4%
3 Years 14.8% 13.6% 17.5%
5 Years 23.6% 19.4% 22.4%

 

Tax Savings with Equity Linked Savings Schemes (ELSS)- MutualFundWala


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