What is ELSS mutual fund scheme and how to invest? Know tax benefit, deductions under 80C | Tax Saver Mutual Fund

ELSS mutual fund: ELSS (Equity Linked Savings Scheme) funds are tax-saving equity mutual funds. The ELSS scheme is an equity-oriented scheme with a mandatory lock-in period of three years.

Features of ELSS Mutual Funds

• ELSS funds have a compulsory lock-in period of 3 years, the shortest amongst all tax saving instruments.
• One can enjoy the dual benefits of capital appreciation from investments in equity, in addition to tax-saving
• Income generated from ELSS Funds is treated as Long Term Capital Gains Tax (LTCG) and taxed accordingly.

How to invest in ELSS mutual fund?

• One can invest in ELSS funds the same way as in any mutual fund. One of the easiest ways to invest is through an online investment services account.
• One can invest either as a lump sum or via the SIP (systematic investment plan).
• SIP ensures discipline and consistency and reduces the risk to capital.
• One can invest as less as Rs 500 in an ELSS fund.

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Know tax benefits, deductions under 80C

ELSS funds offer a cumulative deduction benefit i.e., it offers tax exemption of up to Rs 1.5 lakh from your annual taxable income under Section 80C of the Income Tax Act 1961. In simpler words, one can avail of a tax deduction of up to Rs. 1.5 lakh by investing in ELSS.  

ELSS lock-in period

ELSS schemes have a mandatory lock-in period of 3 years. On redeeming the units, one receives LTCG (long-term capital gains). Gains are not taxable up to Rs 1 lakh in one financial year. LTCG above Rs 1 lakh is taxed at 10 per cent of the gains exceeding Rs 1 lakh without indexation.

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