ELSS Funds

ELSS or Equity Linked Savings Scheme Funds are tax-saving investment instruments that allow you to gain tax-free returns up to a specified limit.

These funds come with a lock-in period of three years and are defined under Section 80C of the Income Tax Act.

As compared to other investment options, ELSS offer higher returns while enabling investors to claim tax deductions.

ELSS funds are diverse in nature. It means they invest in stocks belonging to different industries and market capitalisation (small, mid, and large-cap stocks).

Further, the key objective of equity funds is to offer maximum appreciation to the investor’s capital.

About the working, the ELSS fund manager conducts in-depth research and analysis to pick the best stocks from publicly traded companies. The funds are then invested across diversified stocks in a low-risk environment.

Equity Exposure: ELSS mutual funds invest a minimum of 80% of the capital in equities and other related investments.

Lock-in Period: The lock-in period for ELSS funds is 3 years.

ELSS Tax Exemption: ELSS fund investors are eligible to claim tax deductions under the IT Act Section 80C. While there is no maximum limit on the investment, the tax deduction is only available for taxable income of up to ₹1.5 lakhs.

Portfolio Diversification: ELSS mutual funds invest in a mix of small, mid, as well as large cap stocks. It results in balanced returns and decreased risk.

Market-linked Returns: ELSS offer market-linked returns. Note that the performance depends on the market performance of equities in your portfolio.

Short Lock-in Period: As compared to other long-term investment options, the ELSS funds come with a slightly shorter lock-in period.

It makes them a great option for investors who want to gain the maximum benefits without having to park their money for a longer period.

Once the 3-year lock-in period is over, the investors can easily liquidate their funds to balance their finances.

Tax Benefits: ELSS funds top the list of tax-saving mutual funds. Investing in ELSS mutual funds is the best way for those who want to maximise their tax savings. Investors can gain tax deductions of up to ₹1.5 lakh under Section 80C of the Income Tax Act, 1961.

Diversify Portfolio: Portfolio diversification is another advantage of investing in ELSS funds. Your capital is invested across multiple sectors, capitalisations, and industries, resulting in lower risk exposure and minimum impacts of market fluctuations on your returns.

Capable of Higher Returns: ELSS investments offer relatively higher returns as compared to other options like PPF, NPS, Fixed Deposits, etc.

Low-risk Investment Option: ELSS mutual funds are least exposed to market volatility as they are diversified across different sectors. This makes them a great option for investors with a low-risk appetite.

Flexible Investment: There is no fixed minimum amount for starting an ELSS investment. You can start investing from as low as ₹500. Further, you can either invest a lump-sum amount or opt for a monthly SIP (Systematic Investment Plan).

Save Tax with ELSS: As discussed above, investments made in ELSS mutual funds are eligible for an income tax deduction u/s 80C.

You can claim tax relief of up to ₹1.5 lakhs for investments made towards an ELSS fund. It can help you save tax worth approximately ₹46,800 per year.

Long-term Capital Gains Tax: You can not redeem your investment before the end of its lock-in period of 3 years.
Once this period is over, you need to pay LTCG tax at the rate of 10% at the time of withdrawing your funds. However, if your gains are below ₹1 lakh, no taxes will be levied.

Investment Tenure: As mentioned several times, Equity Linked Savings Scheme funds have a lock-in period of three years. It means, you can not withdraw your investment before the end of this duration.

Doing so can attract heavy fines and penalties. So, consider investing in ELSS funds only if you are willing to stay invested for a longer term.

Risk Tolerance: Although ELSS funds are known for being a low-risk investment option, they are still exposed to a degree of market volatility.

If you have a low-risk tolerance, then consider choosing the funds that have offered a consistent performance over an extended period.

Performance History: Before investing in ELSS mutual funds, it is essential to analyse its historical performance. This simple analysis provides detailed insights into the current and estimated performance of the fund.

Returns: Generating higher returns is the ultimate aim behind ELSS investment. Hence, a good idea is to compare various funds and select the ones that offer desired returns without exposing you to a higher-risk environment. You can use an ELSS mutual fund calculator for this purpose.

SIP vs Lump Sum: There are two ways to invest in the ELSS mutual funds. You can either make a single investment in a lump sum mode or invest through a monthly SIP.

While the former option is based on the “invest and forget” formula, the latter is known for its flexibility and convenience. By choosing the SIP mode of investment, you can set up a monthly automatic payment.

In simple terms, the specified amount will be deducted automatically from your linked bank account towards your ELSS investment. This option allows even the low earning individuals to start investing.

Fund Manager: Last but not least, ensure that your fund manager is trusted and reliable. You can perform due diligence and go through their portfolio to decide whether or not they are the right person to trust with your investment.

Just like the ELSS mutual funds, our health insurance plans in India also offer you dual benefits.

Besides offering you broad medical coverage at affordable rates, our health insurance plans also make you eligible for tax deductions under Section 80D of the Indian Income Tax Act.

At Tata AIG, we offer health insurance plans that come with perks like an extensive list of inclusions, pocket-friendly premiums, higher claims settlement ratio, and a cashless treatment facility anywhere in India.

If you have a limited budget, then we also offer a low-premium health insurance plan that offers the necessary financial coverage without breaking the bank.

Above all, you can claim up to ₹50,000 on insurance premiums paid for yourself and/or your dependents. Not just that, you can also claim additional deductions up to ₹25,000 (₹50,000 for parents above 60 years of age) on premiums towards a medical insurance plan for your dependent parents.