7 Things to Know Before Investing in an ELSS Fund

Investing is a long journey and if you wish to increase your chances of capital appreciation, it’s time to get on board. There are various investment tools available in the market catering to investors of all types. But before making any investment decision, it is advisable that investors first identify the primary reason for their investment. Basically, you need to have a financial goal and then work towards it. Having a financial goal is always of utmost importance because it gives you a fair idea about where and how much you need to possibly invest in order to reach your goal. The next thing investors need to know is identify their risk appetite.

So if you are someone with a moderately high risk appetite, you can consider investing in ELSS funds. Investors can even buy ELSS online using their laptop or smartphone. To find out more about ELSS and how one can benefit from investing in them, continue reading.

More on ELSS

As the name suggests, Equity Linked Saving Scheme or ELSS is a tax saving scheme that allows investors to seek some capital appreciation with tax benefits. As per SEBI’s categorisation, “An open ended equity linked saving scheme with a statutory lock in and tax benefit. Of the total assets, a minimum or 80 per cent is invested in equity and equity related instruments.”

ELSS is an equity oriented mutual fund scheme, which makes it a high risk investment tool. So if you are someone with a moderately high risk profile who also wishes to save some taxes can consider investing in ELSS.

So if you have made up your mind and are looking for options, you might want to consider ELSS fund offered by Axis Mutual Funds. Axis Long Term Equity Fund is an open ended equity linked saving scheme which comes with a statutory lock in period of three years with tax benefit. The investment objective of Axis Long Term Equity Fund is to generate income and long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities. However, there can be no assurance that the investment objective of the scheme will be achieved.

Here are few things you need to know before investing in Axis Long Term Equity Fund:

1.Axis Long Term Equity Fund has a short lock in period

This means that you cannot redeem your ELSS mutual fund units for a minimum period of three years. Having a lock in might actually benefit investors as their investment now has the opportunity to grow. Equity investments usually tend to perform when held for the long run and hence, having a three year mandatory lock in might prove to be beneficial. This three year lock-in is the lowest among tax saving instruments.

2.Axis Long Term Equity Fund has tax benefits

As per Section 80C of the Indian Income Tax Act, 1961 investments of up to Rs. 1.5 lakhs* made in ELSS are exempted from tax deductions. For example, if your annual gross taxable income is Rs. 15 lakhs, you can invest up to Rs. 1.5 lakhs in Axis Long Term Equity Fund and bring down your gross taxable income to Rs. 13.5 lakhs.

3.The is no upper limit for investing in Axis Long Term Equity Fund

Yes, although one cannot claim for tax benefits exceeding Rs. 1.5 lakhs annually through investments in Axis Long Term Equity Fund, there is no upper limit for investing in ELSS fund. Hence, investors, depending on their investment goal and risk appetite can invest as much as they wish in Axis Long Term Equity Fund.

4.Axis Long Term Equity Fund is suitable for long term goals

Axis long term equity fund holds the potential to help investors achieve long term goals like children’s education and their future, building a retirement corpus or buying a weekend home. So if you are someone with a long term investment horizon, Axis Long Term Equity Fund might be a decent investment option.

5.You may remain invested in Axis Long Term Equity Fund for more than three years

Investors have the choice of remaining invested in Axis Long Term Equity Fund even after the lock in period is over. If the scheme is performing well, investors can hold onto to their ELSS fund units instead of withdrawing. Long term investments hold the potential of beating market volatility and hence you can remain invested in the fund every after the lock in period.

6. You can invest in Axis Long Term Equity Fund through SIP Systematic Investment Plan or SIP is a systematic approach which might inculcate the discipline of saving regularly. With SIP, all an investor needs to do is instruct their bank and every month on a predetermined date, a fixed amount is debited from his / her bank and transferred to Axis Long Term Equity Fund. SIP is a simple and hassle free way of investing and investors stand a chance to even benefit from compounding.

7. Axis Long Term Equity Fund offers growth and IDCW option for customers Axis Long Term Equity Fund offers two kinds of schemes: Growth and IDCW. In the growth option, if the fund manages to make any gains, these profits are reinvested into the fund. In the long run, this may result in the growth in the fund’s NAV. Due to some fluctuations in the market, if the fund fails to perform, the NAV of the fund tends goes down. On the other hand, in IDCW option investors receive a payout option where gains or profits made by the funds are distributed in the form of bonuses / IDCW to investors. However, the IDCW amount and frequency is never guaranteed. Investors are only eligible for IDCW if the fund manages to make profit. This too, is solely at the discretion of the fund manager. Make sure that you keep the above things in mind while investing in Axis Long Term Equity Fund. If needed, do adequate research or consult a financial advisor before making an investment decision.

*As per the present tax laws, eligible investors (individual/HUF) are entitled to deduction from their gross income of the amount invested in Equity Linked Saving Scheme (ELSS) up to Rs.1.5 lakhs (along with other prescribed investments) under section 80C of the Income Tax Act, 1961. Tax savings of Rs. 46,800 mentioned above is calculated for the highest income tax slab. Investors are advised to consult his/her own Tax Consultant with respect to the specific amount of tax and other implications arising out of his/her participation in ELSS.

Axis Long Term Equity Fund

An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.