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Unlocking Wealth and Tax Benefits: A Comprehensive Guide to Equity Linked Savings Schemes (ELSS)
Unlocking Wealth and Tax Benefits: A Comprehensive Guide to Equity Linked Savings Schemes (ELSS)

Unlocking Wealth and Tax Benefits: A Comprehensive Guide to Equity Linked Savings Schemes (ELSS)

Mutual funds are like a local train pooling investors’ money into one fund. With the growth of financial products, there are newer and more investor-specific products that give non-monetary benefits in addition to high returns. 

Today let’s dive into one such product called Equity Linked Saving Schemes or ELSS. This is a type of mutual fund which offers attractive features to investors who want to earn decent returns on their investment. It also chases tax benefits and provides portfolio diversification through investing in a single fund. 

Let us understand ELSS features: 

Wealth Accumulation : In ELSS funds, minimum 80% of the corpus is invested in equity which can provide heavy returns to investors. The Remaining 20% is invested in fixed income instruments which protect capital and mitigate financial risk. Investors get capital appreciation and protection under one umbrella. 

Tax Deduction : If a person invests in ELSS, he is entitled to tax exemption worth Rs 1,50,000 under Section 80C of Income Tax, 1961. This means that a person, apart from taking the benefit of a standard deduction worth Rs 50,000, can save Rs 46,800 more from taxable income per year by investing in ELSS. 

Growth Oriented Fund : ELSS typically provides a 10-12% CAGR. This fund has inflation beating capacity and can give high net returns, leading to wealth accumulation for investors. 

Dividend Withdrawal : ELSS has a lock-in period of 3 years. Although there is no provision for premature exit for ELSS investors, you can always withdraw your dividend, if any, within the lock-in period. 

With more people knowing mutual funds and ELSS, there is a huge growth in the Mutual funds industry by increasing AUM and liquidity in the economy. 

Investors have the option to either invest in a lumpsum amount or invest through SIP i.e. systematic investment plans. This can be as convenient as 500 rupees per month.

One of the most fascinating aspects of this fund is that ELSS offers the shortest lock-in period among all tax-saving instruments. 

As the investment landscape evolves and financial products multiply, the Equity Linked Saving Scheme (ELSS) emerges as a compelling option that harmonizes the dual objectives of growth and tax savings. This mutual fund variant’s aggressive equity exposure coupled with substantial tax benefits under Section 80C make it an appealing avenue for both novice and seasoned investors. ELSS, with its balanced approach and enticing features, serves as an ideal stepping stone toward passive income investments.

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Disclaimer: The information provided above is for educational purposes only and should not be considered as financial advice. Investment decisions should be made after careful consideration of individual financial circumstances and consultation with professional advisors.

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