Reasons to Choose ELSS funds

By on April 30, 2019
Reasons to Choose ELSS funds

Equity investors adopt a cautious approach for losing money in a stock market. Smart investors on the other side of the coin invest with a long term perspective in mind. To invest in ELSS funds online is a sought out option in case if you are looking to make a savings on tax. This is a form of mutual fund making an investment in equity stocks. By now you might be really interested to know more about the ELSS funds in details

Tax benefit

The main reason why you need to make an investment in ELSS fund is tax savings. This qualifies under section 80 C of the Income tax act. Any dividend that the investor earns during this period is exempt from tax. In simple terms the income from ELSS is tax free. Just make an investment in ELSS and you can claim tax reduction up to the margin of 1, 50,000. You can even invest more but you are entitled to this much rebate.

A lock in period

When you are considering the performance of mutual funds, with good direct mutual fund app schemes the portfolio is constructed for a longer period of time.  There is no lock in period, but with ELSS there is a lock in period of 3 years. This means that you are obliged to stay invested in these funds for 3 years in order to claim tax rebates. By doing so a habit of forced investment is developed for a long period.

Develops a habit of saving

ELSS schemes develop a habit of forceful saving. You can even start off with a scheme as low as Rs 500. This would point to a habit of regular saving. As it appears to be a systematic investment plan the returns would be calculated every month once you complete the first month of your 3 years. In addition the returns would be exempt from taxes.

Cashing in on the long term value growth

Though it has been found that the lock in period with ELSS is 3 years, for recurring growth it would be better not to redeem your funds after 3 years.  At the same time equity funds are subject to market risk. As the funds go on to invest in equity there is a higher rate of return in terms of tax exemption.

An opportunity is presented to invest in equity even when you are going to save

The benefits of mutual equity fund schemes are calculated in order to cash in on the stock value of your ELSS portfolio. When you are investing in savings scheme it can provide you with returns of 8 % but by investing in stock market the returns are expected to be on the higher end. In a rising economy like India if you possess a good portfolio with rising stocks the chances of returns would be on the higher side.

To conclude investment in ELSS is a desired option as it can lead to savings on the tax front.

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