{"id":991,"date":"2012-12-13T15:25:16","date_gmt":"2012-12-13T09:55:16","guid":{"rendered":"https:\/\/blog.fundsindia.com\/blog\/?page_id=991"},"modified":"2018-04-25T17:33:23","modified_gmt":"2018-04-25T12:03:23","slug":"elss-funds-what-are-they-how-you-save-taxes-and-why-invest-in-them","status":"publish","type":"page","link":"https:\/\/www.fundsindia.com\/blog\/elss-funds-what-are-they-how-you-save-taxes-and-why-invest-in-them","title":{"rendered":"ELSS Funds – what are they, how you save taxes, and why invest in them?"},"content":{"rendered":"
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Tax planning may seem like a tedious exercise requiring a\u00a0lot of effort that may make an ordinary investor nervous at the first glance. Equity Linked Savings Scheme<\/a> (ELSS) offers a simple way to get tax benefits and at the same time get an opportunity to gain from the potential of Indian equity markets. <\/div>\n

What is ELSS?<\/h3>\n<\/div>\n
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Simply put, ELSS is a type of diversified equity mutual fund which is qualified for tax exemption under section 80C of the Income Tax Act and offers the twin advantage of capital appreciation and tax benefits. It comes with a lock-in period of three years.<\/p>\n

Why should one invest in an ELSS?<\/h3>\n

ELSS funds are one of the best avenues to save tax under Section 80C. This is because along with the tax deduction, the investor also gets the potential upside of investing in the equity markets. Also, no tax is levied on the long-term capital gains from these funds. Moreover, compared to other tax saving options, ELSS has the shortest lock-in period of three years.<\/p>\n

Save Tax<\/span> Upto 1.5 Lakhs Under Sec80C <\/span><\/a><\/div>\n

BEYOND TAX SAVING<\/h3>\n\n\n\n\n\n\n\n\n\n\n
Parameter<\/th>\nPPF<\/th>\nNSC<\/th>\nELSS<\/th>\n<\/tr>\n
Tenure<\/td>\n15 years<\/td>\n5 years<\/td>\n3 years<\/td>\n<\/tr>\n
Returns<\/td>\n8%* Compounded Annually)<\/td>\n8%* (Compounded
\nhalf-yearly)<\/td>\n		Linked to equity markets<\/td>\n<\/tr>\n
Minimum investments<\/td>\nRs.500<\/td>\nRs.100<\/td>\nRs.500<\/td>\n<\/tr>\n
Maximum investments<\/td>\nRs.1,50,000<\/td>\nNo limit**<\/td>\nNo limit**<\/td>\n<\/tr>\n
Amount eligible for
\ndeduction under Section 80C<\/td>\n		Rs.1,50,000<\/td>\nRs 1,50,000<\/td>\nRs 1,50,000<\/td>\n<\/tr>\n
Taxation for interest<\/td>\n\u00a0Tax-free<\/td>\n\u00a0Taxable<\/td>\nDividends and long-term capital gain tax-free<\/td>\n<\/tr>\n
\u00a0Safety\/ Rating<\/td>\n\u00a0Highest<\/td>\n\u00a0Highest<\/td>\n\u00a0High Risk<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
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*Current rate only. Interest rates are reset every quarter, linked to prevailing government security rates.<\/p>\n

**There is no upper limit on investments. However, investments of only up to Rs.1,50,000 per year are allowed to be claimed as deductions under Section 80C of IT Act.<\/p>\n

Save Tax<\/span> Upto 1.5 Lakhs Under Sec80C <\/span><\/a><\/div>\n

SHORT Lock-in<\/h3>\n
\n\n\n\n\n\n\n\n\n
Instrument<\/th>\nLock-in Period<\/th>\n<\/tr>\n
ELSS<\/td>\n3 Years from the date of allotment of the respective Units<\/td>\n<\/tr>\n
Bank Fixed Deposit<\/td>\n5 Years<\/td>\n<\/tr>\n
PO Time Deposit<\/td>\n5 Years<\/td>\n<\/tr>\n
NSC<\/td>\n6 years<\/td>\n<\/tr>\n
PPF<\/td>\n15 Years (Partial withdrawal after 6 years)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
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Source: Banks and Post Office<\/p>\n<\/div>\n

Pros and Cons<\/h3>\n

Like all investment options; ELSS too come with its share of advantages and disadvantages.<\/p>\n

Advantages of ELSS over NSC and PPF<\/h3>\n