What is Equity Linked Savings Scheme and its benefits?

The Equity-Linked Saving Scheme (ELSS) is a diversified, open-ended Equity Mutual Fund that offers higher returns as well as great tax benefits. The tax exemptions are offered under Section 80C of the Income Tax Act. A major portion of the capital is invested in equity funds. The lock-in period applicable on these funds is three years and the investors can exit the scheme by selling it after this period.

Hyderabad: Although there are many schemes for tax savings experts say that it is better to invest in the stock market. With a thorough understanding of the Equity-Linked Saving Scheme (ELSS), it is not difficult to get long term benefits.

Tax Savings: Tax savings are crucial in financial planning. Although there are many schemes available for this purpose, the Equity-Linked Savings Scheme (ELSS) offers the option of reducing the tax burden by investing in the stock market. These contribute to the achievement of financial objectives. The tax plan should start from the first month of the financial year. Most people, however, think about it only after January. If you choose the right plan with full understanding even at this time .. it is not difficult to get a long term benefit.

Equity-Linked Savings Scheme: The Equity-Linked Savings Scheme is attracting the attention of investors in terms of their wider benefits compared to other schemes. The investment made under Section 80C of the Income Tax Act is tax-deductible. Remember that it is subject to a limit of Rs 1,50,000. Although these are similar to regular mutual fund schemes, the speciality is that the investment is tax-deductible for a minimum of three years. These include Growth, Dividend and Dividend Reinvestment options--ELSS invests in equities and equity-based investments--when investing in equities for more than one year and if the income exceeds Rs 1 lakh in a financial year, 10 per cent tax is payable on that amount and this also applies to ELSS.

Choosing the right investment: Choosing the right investment is crucial for capital growth. Other tax saving schemes usually have a lock-in period of five years. Compared to these, the lock-in period of ELSS is only three years. So, this is the right scheme to go ahead with if you want short-term plans for investors' tax deductions. These are suitable for doing a Systematic Investment Plan (SIP‌). Investments can be withdrawn after three years. Or may continue. After the end of the three years, the first-month SIP amount can be withdrawn and can be reinvested.

In this way, the investment cycle can be continued and there is an opportunity for growth. While this increases the chances of receiving steady returns. Similarly, having a three-year lock-in allows investments to grow.