What is full form of ELSS? Meaning
stephbaker last edited by ftForumMod
ELSS is Equity Linked Saving Scheme which is typically tax-saving mutual funds. In terms of structure, and functioning, an ELSS is exactly like an equity-oriented mutual fund scheme.
However, unlike a typical diversified or multi-cap fund, it provides tax benefits under section 80C of the Income Tax Act.
ELSS funds have a lock-in period of 3 years. Suppose if you invest a particular amount on September 1, 2019, then the amount can be redeemed on September 1, 2022.
Also, investing in ELSS opens up the possibility of earning superior returns as compared to other tax-saving instruments like fixed deposits and government small savings schemes. I have named few of the best ELSS mutual funds below:
SBI Tax Advantage Fund – Series II – GrowthELSS
Kotak Tax Saver Scheme – Direct Plan – GrowthELSS
Axis Long Term Equity Fund – GrowthELSS
Invesco India Tax Plan
Tata India Tax Savings Fund
Apart from saving taxes, investing in ELSS Fund can be a good diversification to your portfolio. An ELSS fund can provide you an impressive return ranging from 15-18%.
Note: These are my personal views and not professional advice in any regard.
DhruvShukla last edited by ftForumMod
I don't want to go for theoretical part since all other posts have covered it very well. ELSS Fund is a yummy tax-saver avenue which provides shortest lock-in period, i.e. 3 years, followed by 5-years lock-in period with bank deposit.
Keeping in mind that ELSS fund is not a risk-free avenue. But, there was quite a lot of misunderstanding about risk from people's perspective.
Do we not consider inflation a risk to our pocket? Can you say that any avenue which does not beat the inflation is called risk-free avenue? Of course not, inflation eats the money and in general, we need to go above that level to earn the real returns.
Granted, market risk is an ugly one which exist in ELSS. I believe mutual funds have disappointed with the last 2 years portfolio, didn't give a fine performance. But, if you have been investing in the stock market crash since 2008-2009, you will still have tripled your portfolio (including the amounts you've invested). Let me bring the fact here:
I believe ICICI Prudential Long Term Equity Fund is the oldest fund alive. Say we have invested Rs. 10,000 monthly since 15 years back yesterday (including Market crash 2008-2009):
Fund: ICICI Pru Long Term Equity (Tax-saving) Fund - Direct
From Starting Date: 25 Sept, 2004
To Today Date: 25 Sept, 2019
Amount Invested: Rs. 18,10,000
Current Value: Rs. 53, 66,266
SIP Return (Absolute): 196.46%
SIP Return (CAGR): 13.37% p.a.
Let's have discussion from here
@Ishu: What do you think of ELSS? Is it a good investment option? You can share your views on the same.
I do believe it's a very good option, especially for those who don't acquire good knowledge in fundamental and technical analysis but want to build wealth with yearly tax deduction benefit. I myself have been investing in this field but not long back. Now, I do believe it's a very good option.
@Anmol ELSS used to be a tax free investment previously, that was its biggest highlight. But, now it is not so.
True, the journey of husband tax-saver and wife tax-free lasted. But tax-saver (deduction upto Rs. 1.5 lakhs/year) has its own strength for us. I hope that wife will be back soon.
A question to all: Which ELSS Funds you have been investing in and why?
Ishu last edited by
@DhruvShukla Well said! But, don't you think the introduction of Capital gain tax on Equity funds has somehow affected the popularity and charm of ELSS? It used to be a great tax saver option earlier. For claiming Tax deduction under section 80C we have other investing options.
ELSS used to outshine the rest of investing options due to its tax free nature previously. This is not so now. What do you think?
DhruvShukla last edited by
@Ishu I would not comment if it directly affect the popularity. Since the market itself is not bulling forward, the doubts of investors for returns are rising and eventually they held back from investing in mutual fund.
No doubt it hurts when tax-free return was shut down but ELSS still outshines as compared to any other financial avenues so far. I personally like NiftyBees ETF as the next avenue but there is no benefit of tax deduction plus there are brokerages, CNC STT, SEBI fees, GST, Stamp Duty charges apply.
I do not suggest to invest all in one egg (ELSS). It's best to invest in various avenues including ETF, Liquid/Debt M.F., Large Cap MF, Bank deposits, just to stop ourselves from being controlled by market.
Viresh Patel last edited by ftForumMod
@Ishu On a fun note, ELSS is Early Leave Salary Scheme.On a serious note, it's a separate category of Mutual Fund which helps Investor Avail Tax Benefit at the time of Investments ( U/s 80C upto max.1.5 Lac ) and tax efficient upon withdrawal. (this is short response, with an understanding that you know what and how of Mutual Funds).
I hope this response satisfies your query.
rishika08 last edited by
Equity Linked Savings Scheme (ELSS) is an open ended mutual fund scheme with a statutory lock in of 3 years and which invests a minimum of 80% of its assets in equities. It is the only mutual fund scheme in India which qualifies for tax deduction under Section 80(C) of the Income Tax Act.
ELSS offers investors an amazing opportunity to earn quality returns on your investment while saving taxes as well. Since there is a mandatory lock-in period of 3 years, it instils disciplined investment approach amongst consumers.
ELSS offers tax saving opportunity to investors coupled with high returns, which works as an incentive for investors to opt for it. During the income tax filing season, many investors look for avenues to hoard their money and save taxes on that investment. This proliferates the number of individuals investing in ELSS.
Features of ELSS
- Investments upto ₹1.5 lakh are eligible for deduction from your taxable income, provided it remains locked in for 3 years in the scheme. Also, Long Term Capital Gains upto ₹1 lakh from ELSS are also exempted from tax.
- To avail the tax benefit provided by ELSS, an investor should remain invested in the scheme for a minimum duration of 3 years. This inculcates good investing habits amongst consumers, who find it hard to save.
- ELSS invests predominantly in market-linked instruments, such as equities which yield high returns in the long run. Compared to other tax-savings options
Rahul Patel last edited by Rahul Patel
The Equity Linked Savings Scheme is a type of mutual funds investment that deals primarily with stock investments. True to its name, the ELSS invests more than 65% of the investor's corpus in equities. In some cases, bond funds may also be included as a small part of the securities.
ELSS is popularly known for its tax benefits, in that if an investor’s yearly investment amount is up to INR 1,50,000/-, he/she can enjoy tax-free dividends by investing in ELSS.
The ELSS investment can be carried out in two ways – either by investing a lump-sum amount or in multiple instalments in the form of Systematic Investment Plan (SIP). The latter option is a more organized investment method that enables the investor to provide fixed amounts of money at regular intervals. This also reduces the risk-levels of investing in stocks.
Some of the benefits of investing in ELSS are as follows:
Tax-free dividends for investment amounts up to INR 1.5 lakhs.
Good short-term investment due to low lock-in period.
Flexible options to invest in SIP method or lump-sum investment.
Possibility of high returns as it is an equities investment.
Quick and efficient online investment options.
DhruvShukla last edited by
ELSS invests predominantly in market-linked instruments, such as equities which yield high returns in the long run. Compared to other tax-savings options
Exactly, that's the point I wanted to convey despite being cancelled from tax-free LTCG.
I've read a news regarding LTCG, STT and DTT being reviewed by Prime Minister's Office.
What's your comment on the future of LTCG?
Smart2Investor last edited by Smart2Investor
@Rahul-Patel Well said! But, don't you feel that with the introduction of Capital gain tax on Equity funds, ELSS is losing popularity? I know it used to be a great tax saving and investment option earlier. It doesn't guarantee fixed returns also. What is your opinion?
Rahul Patel last edited by ftForumMod
@Smart2Investor Yes, the 10% LTCG tax being levied on ELSS in 2018 got me a little concerned, too. But as the year went along, I realized that despite the capital gain tax, ELSS is still looked upon as a popular tax-saving scheme. There aren't many stock-linked investment schemes in India that offer such huge tax benefits to the investor. Also, investing in ELSS by means of a Systematic Investment Plan, as opposed to lump-sum investments, can provide the investor with fairly steady returns. Of course, no investment is without its own set of demerits. I think investing cautiously and taking the help of a reliable investment advisor is the way forward.