Tax saver Mutual Fund: If you want to invest in ELSS, a tax saver mutual fund, then it is important for you to understand some things first. ELSS, an equity linked savings scheme, is a tax-saving mutual fund scheme that promotes long-term investment. In a financial year, you can avail tax exemption under the Income Tax Act section 80C on investments up to Rs 1.5 lakh in these schemes. However, there is no limit to invest in ELSS. ELSS is also getting better returns than other traditional investment instruments like FD, NSC, KVP for tax saving. Compared to the last 5 years, the average return in the ELSS scheme has been 13 per cent. While the returns of different funds have been 20 to 24 per cent. That is, about 4 times more benefit than FD of a big bank.
1. No compulsion for lock in period
These funds have a lock in period but the specialty is that even after that they can continue to invest in it. A scheme with a lock in period of 3 years or 5 years can also be held for a long time. Keeping it for a long period increases the chance of increasing returns. There is a benefit of having a lock in period, investors hold it for a long period, which also increases the scope for increasing returns.
2. 80% exposure in equity
Talking about investing in ELSS, at least 80 percent of this exposure should be in equity. It can technically be up to 100 percent. ELSS also has the flexibility to invest in all market caps. Which makes it a unique product among equity funds.
3. Can invest with SIP
Investments in Mutual Funds have been facilitated through the Systematic Investment Plan (SIP). Talking about 1.5 lakhs for tax savings, it can be invested throughout the year with Rs 12,500 per month. However, the lock-in period varies for each SIP installment.
4. Redemption Amount Tax Free
The return on investment in ELSS and the amount of redemption is also completely tax free. ELSS offers better post-tax returns, as LTCG is exempted from income tax up to Rs 1 lakh a year from ELSS mutual funds. Taxes at the rate of 10 per cent have to be paid for profits exceeding this limit. Talking about investing in ELSS, at least 80 percent of this exposure is in equity. It can technically be up to 100 percent. It also has the flexibility to invest in all market caps.
5. Better return option
ELSS usually gives high returns. Investing in equity effectively provides better returns that are higher than the regular inflation rate. On the other hand, most tax-saving options with fixed returns such as PPF, 5-year FD, NSC, etc. are hardly able to deliver higher returns than inflation. At the same time, the interest rates on options like FD, NSC are continuously decreasing.
5 funds that have given better returns in 5 years
Mirae Asset Tax Saver Fund: 23%
BOI AXA Tax Advantage: 20%
Canara Reboco Equity Tax Saver: 18%
DSP Tax Saver Fund: 17 percent
IDFC Tax Advantage (ELSS) Fund: 17%
(Disclaimer: Investing in mutual funds is subject to market risks. Business Khabar Online does not recommend any type of investment. Before any investment, check at your level or consult your financial advisor. )
Get Business News in Hindi, latest India News in Hindi, and other breaking news on share market, investment scheme and much more on Business Khabar. Like us on Facebook, Follow us on Twitter for latest financial news and share market updates.
.