Generally, investment in mutual funds comes under the purview of tax, but there is a scheme through which you can avail both solid returns and tax benefits. The name of the scheme is Equity Linked Saving Schemes. Know its benefits.
Mutual Funds: Mutual funds are considered to be a very good scheme in terms of returns. According to experts, despite being market linked, you get an average return of 12 percent on it in the long term. This is the reason why the number of mutual fund investors has increased very rapidly in the recent past. Usually, investment in mutual funds comes under the purview of tax, but there is a scheme through which you can take advantage of both solid returns and tax benefits. The name of the scheme is Equity Linked Saving Scheme (ELSS). ELSS is also called tax saving mutual fund scheme. Know its benefits here-
What is ELSS
At least 80 percent of the total assets in ELSS fund are invested in equity and equity-related securities. Equity Funds are also known as Stock Funds because your money is invested in stocks. If the investment is planned for a long time, then the investor is advised to invest in equity funds, as they can compensate for the loss caused by market volatility. However, there is a high possibility of negative returns if the market remains stable.
Three-year lock-in period
In equity linked saving schemes, you can deposit money in lump sum or through SIP. Its lock-in period is very short. Usually, the lock-in period in schemes like NSC, Tax Saving FD is five years, while in ELSS it is only three years. After this, you can withdraw money whenever you want or continue your investment.
You can start investing from Rs 500 as well
In ELSS, you get the option to choose the scheme according to your budget and convenience. You can start investing in it with just Rs 500. There is no maximum investment limit. According to experts, long-term investment in ELSS can give better returns. In such a situation, it has the capability of wealth creation.
Tax Benefits
Tax is saved on exiting ELSS schemes after 3 years. In this, income tax exemption is available up to a maximum limit of Rs 1.5 lakh under Section 80C of Income Tax. You will get the benefit of this deduction only in the old tax system. Apart from this, other tax exemptions are available on the returns received on investment. In fact, capital gains tax is also levied on the returns received in this. Long-term capital gains up to Rs 1 lakh on ELSS are tax free. Long term capital gains above this amount are taxed at the rate of 10%. Apart from this, cess and surcharge have to be paid.
