What are ELSS funds? All about the best tax saving instrument in the market

BLOG | April 11, 2024

What are ELSS funds?

Equity Linked Saving Schemes often called ELSS funds are mutual fund investment schemes that help in saving tax. They invest the majority of their money in equity schemes and offer much higher returns as compared to other tax saving instruments.

What are the features of ELSS fund schemes?

ELSS funds are one of the best tax saving instruments available in the market. The returns offered along with the tax benefits makes them highly coveted. Their features are:

  • Lock-in period: The lock-in period of ELSS funds is 3 years which is on the lower side as compared to all other tax saving instruments.
  • Better returns: The returns in case of ELSS schemes are better as compared to other Tax Saving instruments.
  • Equity fund: The fund invests in the stocks among various sectors to offer a diversified portfolio.
  • Tax saving: ELSS funds help you in saving tax through section 80C of the Income Tax Act. You can save as much as Rs.46,800 by investing in ELSS funds.
  • SIP (Systematic Investment planning):There is an option to invest monthly in the form of SIPs if you can’t make a lump sum investment.
  • Upto 1.5 lakhs: Investments of upto 1.5 lakhs in ELSS funds qualify for tax deduction under IT act section 80C.

How do ELSS funds work?

Let’s explain to you the workings of these funds in brief:

  1. ELSS funds invest a major part of their portfolio in equity and equity related instruments.

  2. The lock in period for ELSS fund schemes is 3 years. Though you can let the investment continue even after the stipulated lock-in period ends.

  3. The advantages offered get doubled as you get capital appreciation in addition to tax saving.

  4. You can invest in the form of SIP or lump sum. You can SIP as less as Rs.500. Along with that,there are no entry or exit load charges.

  5. The expected returns are typically in the range of 12-15%. You have to remember that just like any other equity related instrument, ELSS schemes have an inherent risk factor associated with them and are volatile in the short term.

Who all should invest in ELSS?

Any person who is looking for investment channels which offer great tax benefits in addition to tax returns can invest in ELSS schemes.

ELSS vs. All (PPF/Tax-Saving FD/NSC/NPS)

There are multiple tax-saving instruments covered under section 80C of the Income Tax act. Let’s have a glimpse at all:

Tax saving instruments Returns Lock-in period Tax on returns
ELSS 12-15% 3 years Capital gains tax
PPF 7-8% 15 years No
Tax saving FD 6-7% 5 years Income Tax
NSC 8% 5 years Income Tax
NPS 8-9% Upto 60 years age Partially taxable

It’s not difficult to infer from this table that ELSS funds are amongst the BEST tax saving instruments available in the market. At Sqrrl, we have a special feature called AXE TAX It offers the best ELSS schemes to the users for convenient tax saving. So, start saving tax now!

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