Dear Readers,

We are happy to present a brief info on the Importance and benefits of Investment in the Equity Linked Savings Scheme.

Q1. What is ELSS?

Equity Linked Savings Scheme (ELSS), are tax-saving mutual funds that you can use to save income tax of up to Rs 1.5 lakh under Section 80C. ELSS funds have a lock-in period of 3 years and invest a majority of their portfolio in the stock market, and can be invested in the form of Lump sums or SIP.


Q2. How do they work?

ELSS, which are a Tax saving mutual funds, invest their 65% of their assets in the stock markets. ELSS funds are best placed to help you earn inflation-beating returns over the long-term. Even though there exists fluctuation and calculated risks, the best performing ones have generated upwards of 20% returns over the long-term through the power of compounding interest.

Q3.  Why should you choose ELSS over other funds?

Let us take an example of a person, who at the age of 25 starts investing Rs. 100,000 p.a. till the age of retirement i.e. 60 years. The chart mentioned below, shows a comparative analysis of how the same investment in different schemes will fare over a period of 35 years:

Analysis of the Table: Here we can clearly see that when amount of Rs.100,000 is invested in ELSS for 35 years, the returns can be as high as Rs 7.48 Crore. An ELSS scheme provides tax benefit u/s 80C of Income Tax Act, and also the returns are Tax Free. The returns are only at historical average of 14%, however there are funds which have given much higher than this. So just imagine the best fund could provide you with! This can surely take care of one’s retired life. However please note that it is always advised that these investment are done through an investment advisor and are also monitored for performance throughout the investment journey.

Q4. What are the benefits of investing in ELSS?

ELSS has varied benefits since it is a diversified investment. Some of them are:


Q5. What are the basic features of ELSS?

The basic features of an ELSS are as follows:

  • A lock in period of 3 years.
  • The maturity value is Tax-Free
  • Investment can be done via Lump sum or SIP mode, however every SIP shall be considered as new investment and will be subject to a lock in of 3 years.
  • Since the funds are market based, there exists a market risk. However, stocks are closely monitored by SEBI and the lock-in and a long term approach avoids majority of the risks.
  • Investment in Equities are Tax- Free if the investment exceeds a time span of One year. ELSS being investment for three years, has the Taxation Benefit at the time of redemption.

Let us have a glimpse of some of the best performing funds and their performances over years:

We hope the information presented was useful.

To know more on investment in ELSS as well as to start investments, please feel free to contact us.

Our Contact details are:

Phone: 022-25674106 / 25644106

Email ID: team@richvikwealth.in

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