Equity-Linked Savings Schemes popularly referred to as ELSS funds have been in the talks for quite some time now. And why shouldn’t it be? They are the only type of mutual funds that help to save tax. These tax-saving investments allot at least 80% of their assets towards equities and equity-related instruments. Thus, these mutual funds serve the dual purpose of saving tax and capital appreciation. These tax-saver mutual funds have a lock-in tenure of just three years, which also happens to be the shortest lock-in period against different types of tax-saving investments. Similar to other tax-saving investments, they are eligible for deductions under Section 80C of up to Rs 1.5 lac per annum. An investor investing in tax-saving investments can save up to Rs 46,800 per annum provided that they belong to the highest tax slab. Now these were some things about ELSS mutual funds that you might already know. This article aims to uncover three things that you might not know about ELSS investments. Read on to know more.

  1. You can make an SIP investment
    As ELSS funds are a type of mutual funds, you can invest in ELSS funds either through a regular and systematic investment offered by SIPs (systematic investment plan) or through lumpsum mode of investment. Basis your investment requirements, you can choose between the two modes of investment. However, you must be mindful that if you decide to opt for SIP investments, each instalment acts as new investment for the purpose of tax.
  2. Tax-free capital gains
    Capital gains are the referred to as the net profit earned after the sale of the mutual fund investment. As ELSS funds are a type of equity funds and have a lock-in period of three years, which makes these investments as long-term investments. Thus, ELSS funds fulfil both the criteria of tax-free capital gains of up to Rs 1 lac per annum.
  3. Holding investments for as long as you want
    As discussed above ELSS investments enjoy the shortest-lock in duration against their counter tax-saving investments. Other tax-saving investments such as Public Provident Fund (PPF), bank fixed deposits (FD), National Savings Certificate (NSC) attract a lock-in duration of 15 years, 5 years, and 5 years respectively. Having said that, you can invest in ELSS for more than three years if you wish. In fact, most experts recommend investing in ELSS funds for a prolonged duration say 10 years or more. They also advise investors to link their ELSS investments to their long-term goals so that they are not tempted to redeem their investments at the slightest hint of uncertainty or volatility in the markets.

ELSS tax saving mutual funds are believed to be one of the most lucrative, simple, and opportune tax-saving investments. Before you invest in mutual funds, ensure that your financial goals, risk appetite, investment tenure, are aligned with your investment portfolio and the investment objective of your mutual funds. Happy investing!