ELSS Mutual Funds: Discover Benefits and Investment Tips

Unlocking the Benefits: A Comprehensive Guide to ELSS Mutual Funds

Equity Linked Saving Schemes (ELSS) Mutual Funds are recognized for combining wealth generation with tax-saving advantages. If you're considering investing in ELSS, here's everything you need to know to navigate this opportunity effectively.

Understanding ELSS:

ELSS Mutual Funds generally focus on investing in equity and equity-related instruments. They provide tax deductions of up to Rs. 150,000 on annual taxable income under Section 80C of the Income Tax Act, hence their 'tax-saving' reputation.

Key Features of ELSS Funds:

1. Minimum 80% Equity Allocation: ELSS funds allocate at least 80% of their portfolio to equity and equity-related investments, emphasizing their equity-centric approach.
2. Diversification Across Dimensions: These funds diversify across various market caps, themes, and sectors, offering a balanced plan for wealth growth.
3. Lock-in Period and Tax Exemption: ELSS funds have a mandatory three-year lock-in period with unlimited investment duration, ensuring tax benefits under Section 80C.
4. Tax Treatment of Income: Income generated from ELSS is considered Long-term Capital Gain (LTCG) and is taxed at 10% if it goes beyond Rs. 1 lakh.

Benefits of ELSS Tax Saving Mutual Funds:

• Portfolio Diversification: ELSS funds contribute to risk reduction by spreading investments across diverse financial instruments.
• Low Minimum Investment: ELSS makes it accessible to numerous investors with a minimal investment starting at Rs. 500.
• SIP for Cost Averaging: Systematic Investment Plans (SIPs) enable investors to average out purchase costs, encouraging disciplined, steady investments.

Crucial Considerations Before Investing:

• Investment and Tax Planning: Define investment and tax strategies that align with the features of ELSS.
• Assess Your Investment Horizon: Align your investment timeline with the ELSS three-year lock-in restriction.
• Evaluate Past Performance: Analyze a scheme’s performance over the past decade to evaluate its consistency and resilience to market fluctuations.

Popular Asset Management Companies Offering ELSS Funds:

• Axis Mutual Fund
• PGIM India Mutual Fund
• Kotak Mutual Fund

Expert Advice and Disclaimer:

Before investing, consider your financial objectives, risk tolerance, and investment timeline. It is advisable to consult a professional investment advisor. The list of ELSS Funds is based on past three-year returns and isn't intended as specific advice. Begin your ELSS investment journey wisely, aligning with your financial goals to maximize the benefits of these tax-saving mutual funds. Happy investing!

Disclaimer: Investment in mutual funds carries risks. Please carefully read all scheme-related documents before investing.

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