4 Reasons Why You Should Consider Investing In Elss Funds

By Author: Shashank Bhaskar
Total Articles: 63
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People belonging to different economic strata of society wish to build a pool of savings by investing in various assets, commodities, and financial products that guarantee returns. Whether they intend to do so for the long term or short term, they need to remain prepared with a financial plan. It ensures they can use their money wisely and save for fulfilling future requirements.
You can consider many investment vehicles, including ELSS, to earn returns while investing in a strategic and organised manner. You can save tax and create wealth simultaneously within a short time. Here are some reasons why these funds are an ideal investment option:

You can save tax and create wealth simultaneously: These are multi-cap funds that invest in companies of all sizes – large, mid, and small – across all sectors. It also has the potential to create wealth over the long term through equities. You can also claim up to Rs. 1.5 lakh tax deduction under Section 80 C of the Income Tax Act. ...
... You can create wealth over time and earn tax benefits by investing in ELSS funds. 


A shorter lock-in period: If you compare the lock-in period of these funds with other tax-saving instruments, you will find that the lock-in period for others is at least up to 10 years compared to this with only three years lock-in period.


You can start by investing through small SIPs: Like all other mutual funds, you can easily invest in these tax-saving funds through SIP. When your income increases, you can increase your investment amount through SIP top-up. And if you want to get the full tax deduction for investing in these funds, you have the convenience of investing Rs. 12,500 every month instead of putting Rs. 1.5 lakh in one go.


You can save more: These funds have a minimum lock-in period of three years, after which the long-term capital gains of up to Rs. 1 lakh a year are exempt from income tax. However, if the gains are of a higher amount, it attracts a 10% income tax. 

If you compare these funds with a 5-year FD, you will benefit from them in terms of taxation. The returns from FDs fall under the income tax bracket. For example, if you fall under the 30% tax bracket, your FDs will also include a 30% tax. But for ELSS mutual funds, the long-term capital gains above Rs. 1 lakh attract a tax of 10% on your returns.
The incentive to save tax, conveniences of a mutual fund and potential for long-term wealth creation makes ELSS an excellent investment choice. But make sure to choose the fund for the right financial goal from the mutual fund apps.