You must have heard about ELSS Fund but if you have not heard and you want to invest in it, then this blog can be helpful for you because in this blog we have provided all the information related to ELSS Fund so that you can be clear that you should invest in it or not.
What is ELSS FULL FORM
The full form of ELSS is :
EQUITY LINKED SAVING SCHEME
Meaning of ELSS Fund
ELSS stands for Equity Linked Savings Scheme. ELSS Fund is similar to an ordinary equity mutual fund scheme.
The only difference is that ELSS has a lock-in of 3 years. This means that you cannot withdraw your investment before 3 years.
Also, you get a tax benefit of Rs 1.5 lakh under Section 80C of Income Tax every financial year for investing in ELSS Fund.
Who should invest in ELSS Fund
Any HUF or individual can invest in ELSS. It is more beneficial for those who know about it. Can take the risk associated with it and stay in the investment for a long time.
Younger age investors can invest for a long time in ELSS funds. You can be happy to see your fund grow compounded, and take advantage of its unpredictable returns.
ELSS Fund Lock-in Period
ELSS funds have the shortest lock-in period among all types of savings schemes covered under Section 80C of Income Tax.
ELSS mature in the shortest period i.e. 3 years. The investor can withdraw his money anytime after that.
If you invest in ELSS through SIP, then each installment of the SIP is considered as a new investment.
Many investors have a perception that ELSS funds have a lock-in of 3 years from the date of first investment; but it’s not like that.
Every SIP installment is a new investment.
- If you invest in ELSS Fund on 15th February 2021 aditya birla tax relief 96 fund If I buy a unit through SIP, then that unit will be locked for the next 3 years i.e. till 15th February 2024.
- Similarly, the unit purchased next month i.e. on 15th March 2021 will be locked till 15th March 2024.
ELSS Fund Calculator
There is a tool that displays your ELSS Fund returns. It depends on your scheme and investment method. Like you have invested in Lump sum or invested through SIP.
This can be calculated by entering the investment amount, tenure and expected return % in the ELSS SIP calculator. ELSS SIP Calculator
Tax Benefits: ELSS Fund Tax Benefits
In an ELSS or Equity Linked Savings Scheme, an individual or HUF can save up to Rs 1.5 lakh under section 80C of the Income Tax Act 1961.
This means that Rs 1.5 lakh deposited in ELSS is deducted from your annual total income. In this way you can save a substantial amount in the form of income tax.
ELSS Fund Redemption (Payment Process)
In fact, there are as many tax saving investment options as possible. ELSS Fund is the only option with the shortest lock-in period (only 3 years) among them.
After the lock-in period of 3 years, you can redeem it, or get paid.
Now if you want to know whether these ELSS can be redeemed even within 3 years? So my answer would be – not at all. Because ELSS funds do not allow to receive payment before 3 years.
It is recommended by financial experts to invest for 5 to 7 years to get good returns from ELSS.
Redeem in odd situation
In case of exceptional circumstances like death of the investor, the nominee or legal heir can sell the investment only after 1 year from the date of allotment of the unit.
We can understand this in this way that if the investor dies after 5 months of buying the unit, then the nominee will get the unit at the same time. But he will have to wait for 7 months to sell the unit.
All those units get transferred to the nominee, but he cannot sell them for 1 year.
In this way the lock-in period is reduced from 3 years to 1 year in the event of the death of the investor.
Which is better NPS or ELSS
Although the tax benefit in NPS is ₹2 lakh per annum, of which ₹1.5 lakh is available under section 80C and ₹50000 under section 80CCD(1)B.
The maturity period of NPS is when the investor attains the age of 60 years, whereas the maturity period of ELSS is only 3 years.
Over a long period of time, the risk in ELSS gets reduced, and the compounding policy also gives good returns.
Top 5 Best ELSS Fund in 2021
While choosing an ELSS fund, it should be reviewed on various parameters, only then one should be selected.
The decision should be taken based on the financial goals of an individual and his risk taking ability.
Here in the table below is a list of some of the best performing ELSS Funds, which have shown good returns over the years.
ELSS FUND NAME
|3 YEAR RETURNS||
1 YEAR RETURNS
Mirae Asset Tax Saver Fund
Axis Long Term Equity Fund
Canara Robeco Equity Tax Saver Fund
Aditya Birla Sun Life Tax Relief 96 Fund
Motilal Oswal Long Term Equity Fund
Important notice- The figures in the above list are for your information only. Investors are advised to invest only after collecting the necessary information from their level before investing, considering their financial goals, risk appetite and returns.
Is ELSS safe: Is investing in ELSS funds safe?
If your objective is only to save tax then it is advisable not to invest in ELSS as ELSS is actually a part of equity scheme.
So one should always keep in mind that equity schemes can be risky. However, with the shortest lock-in period as well as tax savings and long-term investment, this fund can deliver much higher returns than other savings schemes.
While choosing an ELSS, one should invest only after considering its risk, lock in period and returns of previous years.
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