How are ELSS mutual funds when compared to other options?

Pijush Kanti Biswas

ELSS is a dedicated mutual fund scheme that allows investors to save tax. It also provides an opportunity for long term capital appreciation. An ELSS fund manager invests in a diversified portfolio, predominantly consisting of equity and equity related instruments that carry high-risk and have the potential to deliver high-returns.

ELSS mutual funds when compared to other options:

Some examples of popular ELSS for 2017:

  1. Reliance Tax Saver (ELSS) Fund 
  2. IDFC Tax Advantage (ELSS) Fund 
  3. Aditya Birla Sun Life Tax Relief 96

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ELSS Mutual funds are special kind of mutual funds that are exempt from income tax exemption under section 80c. 

That means you claim exemption up to 1.5L from your taxable income if you invest that amount in ELSS funds. The profit from ELSS funds is also tax free. 

However, you need to know the following things about ELSS funds:

1. ELSS funds are equity funds (they invest in stocks of public listed stocks) and hence carry the risk of equity markets.

2. ELSS funds have lock-in of 3 years - that means you cannot sell you ELSS funds before 3 years. Your money is locked till then (however, this is much lower than 15 years lock in of PPF). Other mutual funds do not have lock-in period.

3. Minimum investment in ELSS funds is as low as Rs 500. However, this is true for some of other mutual funds also. But most of the mutual funds have higher minimum to start with.

4. ELSS returns are tax free (after 3 year lockin). Other mutual funds returns are tax free is sold after one year (when they are accounted under long term capital gains tax)

5. Maximum exemption under section 80c is Rs 1.5L per annum. Other mutual funds do not have this exemption. 

Here is list of ELSS funds available - Tax saving mutual funds

Check out the portfolio of ELSS mutual funds. 

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