4 Benefits of investing in Equity Linked Savings Scheme
Equity Linked Savings Scheme or ELSS is a financial tool that diversifies the investment fund into an equity and equity related products. It is a great scheme that gives you the opportunity to grow your wealth while also saving big sums on of money on tax. Additionally, if you are a conservative investor who can go through some amount of risk to earn high returns, this is the scheme for you.
Still unsure of whether an equity linked savings scheme can felicitate your investment plan? Here are some benefits that will help you with a clear picture:
Enjoy tax-saving benefit – As mentioned above, the major benefit of investing in an ELSS fund is tax-saving. The investment type is covered under the category of tax deduction as per the income tax act of 1961. This essentially means that all your returns made on your ELSS investment are free from tax. However, you must note that amount worth of tax exemption allowed is only INR 1.5 lakhs.
Long-term growth on investment – Mutual funds are undoubtedly subject to market risks. However, the funds are invested in a number of equity products. This brings to you a much higher chance of enjoying returns on your investment. Furthermore, allowing your funds to grow for a longer term will also increase the chance of reaping much bigger returns on your investment.
Includes a lock-in period – Generally, mutual funds do not include a lock-in period. Albeit, a good portfolio is built through locking in your funds for longer periods. Equity Linked Savings scheme or ELSS need you to enter a lock-in period of at least 3 years. You will have to keep your funds tied down for a minimum period of 3 years.
Builds a saving habit – As part of the Equity Linked Savings Scheme, you must systematically invest some amounts of money. You can choose the appropriate amount that can be as low as INR 500. This ensures that you regularly add up to your investment plan and thus, inculcates a good habit of saving.
As a smart investor, you must also consult an investing professional who can guide you on the most optimum route to making savings through this scheme. Essentially, also seek advice from a tax consultant to better understand the different tax benefits that you can avail through this scheme.