It is important that before making any kind of investment you are completely aware of the scheme and its benefits. So, if you are interested in investing in ELSS, you must know the benefits of this investment. ELSS is the acronym of Equity-Linked savings scheme. These funds are provided by fund houses and managed by highly experienced and knowledgeable finance professionals. this means it is a safer kind of investment because it is looked by experienced persons who give you tax-saving benefits.
ELSS is an investment scheme that offers you tax benefits. It is mentioned under the income tax act section 80C. According to this act, you can invest up to Rs. 1.5 lakh within a financial year. You can also invest more than the above-stated amount but then and you will not get the tax benefit according to Section 80C.
ELSS was not the only investment mentioned under section 80c but because of the benefit it provides to the investor, it is continuously attracting more investors.
Types of ELSS
There are two main types of ELSS funds including:
- Dividend fund
- Growth fund
- Growth Fund: It is a long term scheme for investors who want to create more wealth. in this scheme, the investor receives the full value of invested funds during the redemption time period.
- Dividend Fund: It is further subcategorized into 2 types including dividend payout and dividend reinvestment. Under the former category, the investor will get the dividend which will be tax-free. In the latter category, the investor will be given an option to reinvest his dividend in the form of new investment.
All you must know about ELSS before you invest
- There is no limit to the amount you wish to invest in this is a scheme. However, you will receive tax-saving benefits only up to the amount of INR 1,50,000.
- it is one of the best tax saving funds because it offers tax benefits with probably e higher returns. Moreover, the lock-in period in this investment is also short.
- If you are looking for long term capital gains then also so you are exempted from tax of INR 1Lakh and whatever dividend you will receive will be tax-free.
- You are free to invest In this fund after the completion of you are three years lock-in period.
- The risk associated with this scheme is much higher than FDs or PPF. However, the return you get from this is scheme is also probably higher than FDs and PPF.
Therefore, it is essential for you to look after all the aspect of ELSS along with your investment objectives before you decide to invest. Also, you need to consult an n n n experienced person in this case who can guide you in the best possible ways. Taking the help of a financial advisor and expert will save you from any kind of risk involved in this kind of investment.