Equity Link saving scheme

Equity link saving scheme better known as ELSS is equity based mutual fund. This is tax saving mutual fund that aids you in availing tax deduction. ELSS is a saving scheme alternative under section 80C. These are the schematic mutual fund where people invest throughout a year. However people at times decide to invest in ELSS at the last moment when they have insufficient investment to show case in a financial year.

Advantages of ELSS

  • A minimum lock-in of just 3 years which is considerably less in comparison to other mutual funds
  • Can earn returns that are substantially higher than the rate at which we are investing
  • Earnings once you done with the lock in period are 100% tax free
  • The power of compounding will help you earn in multiples of your principal amount
  • There is no maximum limit to invest

Even though Equity link saving scheme sounds a perfect profitable venture every investment comes with some or the other disadvantages. So does ELSS.

Disadvantage of ELSS

  • It is very difficult to decide which fund to make your investment in
  • A ton of documentation is required  at first
  • There are no guaranteed returns, as this is an equity based mutual fund which makes it subject to market returns, hence it is not possible to confirm whether or not you will get any returns
  • Most mutual funds won’t accept investments from people living in Canada and the US
  • There is also no premature withdrawals that are allowed

ELSS for everyone or is it for few let’s see…

ELSS is for the individuals who are quite recently beginning in their professions. Who are bringing home the bacon and wish to go for mutual funds that are not high on risk. ELSS is additionally for the general population who are getting a ton of different chances to put their investment into high risk investment and need some type of venture that will enable them to save money on tax.

ELSS is the sort of venture that does not have any age gap, you can begin as youthful as you need. ELSS is additionally for the sort of individuals who don’t have confidence in putting all investments tied up on one place. As in invest into the main 3 or 4 high performing ELSS and get the best sort of profits after some time.

Options in ELSS while Investing

There is growth option – where the holder will not get any benefits in the form of dividends. The holder will only receive the benefits at the end of the tenure which will help appreciate your NAV and thus multiply your profits.

Dividend option – The option where the investor gets timely benefit of dividends as compared to a wholesome amount at the end is called as the dividend option

Dividend Reinvestments option – The final option that an ELSS policy holder will receive is a dividend reinvestment option where the policy holder has the option of giving back the dividends received in order to add to the NAV. It is a good option in the case that the market is performing very well during the 3 year tenure of the Lock in period

Points to Ponder

  • ELSS and PPF both are tax savings option issued by the government of India. The major difference in between the 2 is the lock in period. For PPF it being 15 years and for ELSS it being just 3 years.
  • Investment in ELSS can be done using SIP.
  • The ELSS investment procedure is very simple, your KYC (its mandatory) and PAN card details in place. One can later approach asset management companies. There are many ways to go about ELSS, you can do all the investment related procedures by yourself, or you can appoint a middle man or agent. One can also invest in ELSS directly from online platform.

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