ELSS Mutual Funds Growing Wealth with Tax Benefits
By Team Asianet Newsable | First Published Apr 23, 2024, 6:57 PM ISTELSS mutual funds have the shortest lock-in period among tax saving schemes. In this article, we will understand about ELSS mutual funds in detail.
Introduction
People invest their money to gain returns. They are always looking for opportunities through which they can create wealth, generate returns as well save tax. Certain investment options in the market can help you save tax. ELSS Mutual funds are the best among them.
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ELSS mutual funds have the shortest lock-in period among tax saving schemes. In this article, we will understand about ELSS mutual funds in detail.
What are ELSS Mutual Funds?
ELSS Mutual Funds are equity-linked savings schemes with a major percentage of investment in equity and equity-related schemes. These mutual funds are eligible for tax deduction under section 80C. By investing in ELSS mutual funds you can claim tax deductions up to ₹1.50 lakhs.
There is a lock-in period of 5 years in ELSS mutual funds. This is the shortest lock-in period among the tax-saving instruments. The income you earn on ELSS mutual funds is considered long-term capital gain (LTCG). If this income is above 1 lakh, it is taxed at 10%.
Why Invest in ELSS Mutual Funds?
ELSS mutual funds have great benefits which make people invest in them. Here are some of the major benefits which can make you understand why to invest in ELSS mutual funds: -
1. Shortest Lock-in Period
The majority of tax savings instruments have a 5-year lock-in period. But when it comes to ELSS mutual funds the lock-in period is only 3 years. It is the shortest lock-in period among all the tax savings instruments.
2. Diversification
ELSS funds offer the benefit of diversification. Here the money is invested in various types of companies ranging from small cap to large cap.
3. Higher Returns
ELSS funds invest majorly in equity. Due to this, they give higher returns. The returns they give are quite higher as compared to other tax saving instruments like tax saving FDs, PPF, NPS etc.
4. Tax Benefits
ELSS funds give you the benefit of tax deduction under section 80C of the IT Act. You can claim tax exemption up to 1.50 lakhs by investing in ELSS funds.
5 Better Post Tax Returns
If your total gain on the ELSS funds is less than 1 lakh then you don’t have to pay any taxes. ELSS funds which have gains of more than 1 lakh are taxed at 10% only as considered to be a long-term capital gain.
Top ELSS Mutual Funds
The below table determines the best ELSS mutual funds by returns in India.
| Fund Name | Fund Size | 1 Years Return | 3 Years Return |
| Quant ELSS Tax Saver Fund - Direct Plan-Growth | ₹7769.92 Cr | 54.24% | 32.80% |
| SBI Long Term Equity Fund - Direct Plan-Growth | 21202.78 Cr | 56.81% | 27.26% |
| HDFC ELSS Tax saver - Direct Plan-Growth | 13820.09 Cr | 45.13% | 26.50% |
| DSP ELSS Tax Saver Fund - Direct Plan-Growth | 14147.0 Cr | 39.70% | 21.12% |
Conclusion
If you want higher returns with tax benefits then ELSS mutual funds are a good option. ELSS mutual funds have the shortest lock-in period as compared to other tax savings instruments. You can invest in mutual funds online via Dhan, India’s one of the leading investment platforms.
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