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What is the difference between ELSS and SIP?

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Mridul Agrawal

ELSS is type of a mutual fund whereas SIP is a method of investing. An investor can start an SIP in an ELSS fund.

Equity Linked Savings Scheme or ELSS is a type of mutual fund wherein a major portion out of the total fund is invested in equity and related products. As evident from the name of the scheme, it comes with a benefits attached to it, in the form of tax savings. An investor can avail tax benefits unto ₹1,50,000 under the ELSS scheme.

SIP is a systematic way of investing your money in mutual funds. You can invest every month or quarter or year, it depends on the plan you have chosen. It encourages investors to save money and in the end, they can redeem better returns. 

A few features of SIP are- investors don’t have time to keep an eye on market and hence can pour in money into SIP. In SIP, one can also get the benefits of compounding i.e., you can reinvest the interest earned from the SIP. In the long run, it can make a huge positive impact on your returns.

Pijush Kanti Biswas

ELSS and SIP are two completely different things. ELSS is a mutual fund you can invest your money in whereas SIP is the method of investing money in mutual fund.

Equity Linked Savings Scheme (ELSS):

  • 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.
  • Features of ELSS Funds:
  1. Tax-saving
  2. Three-year lock-in period
  3. Can be held even after the completion of three years
  4. Offers dividend as well as growth options
  5. Tax Saving instrument
  1. Reliance Tax Saver (ELSS) Fund 
  2. IDFC Tax Advantage (ELSS) Fund 
  3. Aditya Birla Sun Life Tax Relief 96

Systematic Investment Plan (SIP):

  • An SIP is an option of investing a fixed sum in a mutual fund scheme on a regular basis i.e. predefined regular interval. It is similar to regular saving schemes like a recurring deposit.
  • It is a disciplined investment plan and cost averaging helps reduce impact of market volatility.
  • With SIP, one can build up significant wealth in long run with small sums of money.
  • Some examples of popular SIP for 2017:
  1. ICICI Prudential Banking and Financial Services Fund – Retail
  2. DSP BlackRock Natural Resources & New Energy Fund – Regular
  3. UTI Transportation and Logistics Fund


Happy Investing!

Tanya

An Equity Linked Savings Scheme (ELSS) is a type of tax saving mutual fund that an investor can invest in to reduce their tax burden upto Rs.1.5 Lakh under the sec 80C.

 Features of ELSS include:

  • 3 year lock in period
  • Equity diversified fund
  • No guarantee on return, unlike mutual funds
  • No exit load
  • Expense ratio varies from 2.25-2.5%

A Systematic Investment Plans (SIPs) is where the investor invests a specific sum of money at regular intervals. This specific amount is directly deducted from the investor’s bank account. It disregards the timing of the market. 

Features of SIP are:

  • Investment discipline
  • Mitigation of risk
  • Flexibility
  • Hassle free

 

Devanshu

ELSS or Equity Linked Savings Scheme is a category of mutual funds that invests in diversified equity and also offers tax benefits under the section 80c of the income tax act of India. ELSS schemes have a fixed lock-in period of 3 years from the date of purchase of respective units.

To read more about ELSS, please click here

SIP or Systematic Investment Plan is a facility given to investors where they can invest a fixed amount of money into a mutual fund scheme every month. The purpose of an SIP is to negate the effect of large fluctuation in the markets happening on a daily basis or in other words it helps in rupee cost averaging. The second benefit of an SIP is that a small part of income is invested every month and the entire burden of investment gets shared across 12 months instead of one 1 annual lump sum investment. The amount is deducted automatically each month from the bank account of the investor.

To read more about SIP, please click here

Therefore, the major difference is that ELSS is a category of mutual fund whereas SIP is a technique used for investing in all types of mutual funds.

An investor can use SIP as a tool to invest in ELSS funds, this will help in getting the advantages of both at the same time. Investor will be able to save tax on his income and at the same time will be able to invest a small part of his/her income in the fund every month without feeling any major financial burden.

Some of the top performing ELSS funds are:


Ankit

Equity Linked Saving Scheme (ELSS) is a type of Mutual Fund where investments are made in Equity.

SIP (Systematic Investment Plan) is way of investing in mutual funds.

Key features of ELSS are:

Lock- in –In ELSS there is a minimum lock-in period of 3 years in any/all ELSS schemes. Under ELSS schemes, pre-mature withdrawal is not allowed before the completion of lock-in period. In case of Mutual Funds there is no lock-in period, investments can be withdrawn at any point of time after investment.

Tax benefits- Although there is no upper ceiling for investing in an ELSS scheme, however tax benefits for ELSS are available to the tune of Rs. 150000 under Section 80C of the Income Tax Act. There is no such tax saving or benefit available for other mutual fund schemes.            

Like other mutual funds, any dividend received by the investor is tax-free. Similarly, Long Term Capital Gains (LTCG) arising upon sale of mutual funds after a period of one year is also exempt.

This is a method of investing regularly in a mutual fund. When an investor sets up an SIP with a mutual fund, he fixes an amount of money he wants to invest in a mutual fund every month. This amount automatically gets debited from his bank account every month and gets invested in the mutual fund. SIP is preferred by investors who do no not have lumpsum amount to invest in a single go and prefer to invest a fixed amount every month from their income. This form of investment is very much planned.

On the other hand ELSS is preferred by investors looking to get tax benefit by getting a deduction in their total taxable income.

An investor having a regular flow of income and looking to take tax benefits can invest in an ELSS via SIP. 

Kavita Soni

ELSS (Equity linked savings scheme) is a kind of mutual fund whereas SIP (Systematic Investment Plan) is a method used to invest in funds.

ELSS mutual funds have a lock-in period of 3 years and are tax exempt up to the amount of 1.5 lakh under section 80C of Income Tax Act. Chances of getting high returns in long term from ELSS funds are high.

SIP as the name suggests helps you to invest in mutual funds with continued and regular investments. Specific amount of money is put in funds every month, quarter or week. SIP helps in reducing the risk of investment in equity mutual funds by averaging the risk among the multiple intervals. SIPs help to increase the capital of mutual funds because through small amount of regular investments, people with ordinary income get a chance to invest in mutual funds and earn higher returns. They are one of the easiest options for investment.

So basically, SIP and ELSS are altogether two different concepts and they are linked to each other in the sense that if you want to invest in ELSS, then you can make use of SIP as a technique of investment.

Visit this link for checking out some of the good ELSS funds in terms of their performance.

RITU

ELSS is a specific type of mutual fund. While SIP is way of investing in mutual funds. 


Investments in ELSS mutual funds are exempt from tax under section 80c (upto Rs 1.5L). The returns are also tax free.


SIP is regular way of investing in mutual funds. You can do SIP in ELSS funds also.

Harsh

ELSS and SIP are very different things. Both are related to Mutual Funds. 

ELSS mutual funds stand for Equity Linked Savings Scheme, also known as Tax Saving Mutual Funds. These are a kind of mutual funds where the investment amount is exempted from tax under Section 80C (up to 1.5 lac). These are one of the best tax saving options. The investment are locked for 3 years. Below are some example of good ELSS Mutual Funds. 

SIP stands for Systematic Investment Plan. This is a method of investing regularly in a mutual fund. When you set up an SIP with a mutual fund, you fix an amount of money you want to invest in a mutual fund every month. This amount automatically gets debited from your account every month and gets invested in the mutual fund you earlier chose.

One can start SIP in ELSS or in any kind of Mutual fund. 

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
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