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Mutual Funds - What is ELSS?

03 Jul 2018

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Although all equity funds exempt you from paying long-term capital gains tax of 10.4% up to an amount of ₹1 lakh (apart from grandfathering clause), there is one breed of equity funds that give you tax deduction benefits at the time of making an investment. These are equity-linked saving schemes (ELSS), more popularly known as tax-saving mutual fund (MF) schemes.

An ELSS gives you tax deduction benefit of up to ₹1.5 lakh under Section 80C. This is the only pure equity investment vehicle that offers Section 80C deduction benefits.

The only catch here is it comes with a 3-year lock-in. Other equity funds don’t carry a lock-in. Remember, the lock-in also applies to your systematic investment plans (SIP); every monthly instalment you make in an ELSS is subject to a 3-year lock-in.

Other than deduction benefits and the lock-in, an ELSS is quite the same as a diversified equity fund. It invests in equity shares of companies across sectors and market capitalisations. When investing in ELSS, care should be taken to not invest in a new scheme every year to save taxes. One ELSS in the portfolio—in which you keep topping up every year—is more than enough.

Source: Live Mint BACK

To be added soon

Priyanshu B. Tanna

SEBI registered IFA

ARN119467 & EUIN E-183966

To be added soon

Bharat Tanna

SEBI registered IFA

ARN26176 & EUIN E-044509

To be added soon

Kundan B. Tanna

SEBI registered IFA

ARN294073 & EUIN E-553599

Risk factor

Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performances of any Mutual Fund Scheme may or may not be sustained in future. There is no guarantee that the investment objective of any suggested scheme shall be achieved. All existing and prospective investors are advised to check and evaluate the Exit loads and other cost structure (TER) applicable at the time of making the investment before finalizing on any investment decision for Mutual Funds schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a Trailing Commission on client investments. Disclosure For Commission earnings is made to clients at the time of investments. Option of Direct Plan for every Mutual Fund Scheme is available to investors offering advantage of lower expense ratio. We are not entitled to earn any commission on Direct plans. Hence we do not deal in Direct Plans.

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