(Last Updated: May 5, 2020)
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What is full form of ELSS? Meaning

  • @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?

  • @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. ūü§ě

  • @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.

  • 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

    1. Investments upto ‚āĻ1.5 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 ‚āĻ1 lakh from ELSS are also exempted from tax.
    2. 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.
    3. ELSS invests predominantly in market-linked instruments, such as equities which yield high returns in the long run. Compared to other tax-savings options

  • 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 ‚Äď 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.

  • @rishika08 said in What is full form of ELSS? Meaning:

    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.

    Source: https://www.moneycontrol.com/news/business/economy/exclusive-pm-modi-fm-may-take-more-steps-to-cheer-market-huge-tax-cuts-likely-sources-4581361.html

    What's your comment on the future of LTCG?

  • @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?

  • @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.

  • ELSS is an equity-linked saving scheme (ELSS). With the dual advantage of Tax-saving & potential for better returns than traditional Tax-saving Investment Products, this category of Mutual Fund Schemes is must-have for every investor. These funds also have the lowest lock-in period of just 3 years amongst all the options available in Section 80C.

  • ELSS stands for Equity Linked Savings Scheme. It is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products, therefore, there are some risk carried in ELSS. However, research suggests that ELSS has given positive returns over a longer period of time.

    And ELSS has the shortest lock-in period as compared to other instruments (PPF- 15 years, NSC- 6 years). This probably explained why ELSS is one of the most popular and attractive instruments for investment.

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