What Are the Advantages of Investing In ELSS Tax Saving Schemes

Equity Linked Savings Scheme (ELSS) is an equity mutual fund scheme that is ideal for someone who wants to save tax. However, this is a very high risk investment scheme that predominantly invests in equity and equity related instruments of publicly listed companies. Since ELSS comes with a tax benefit, it is also referred to as a tax saver fund.

Let us take a look at some of the advantages of investing in the Equity Linked Savings Scheme –

ELSS fund comes with a tax benefit

The biggest advantage of investing in ELSS schemes is that they come with a tax benefit.

*ELSS Investments are subject to a 3-year lock-in period and are eligible for tax benefit under section 80C of the Income Tax Act,1961.

#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.

Finance Act, 2020 has announced a new tax regime giving taxpayers an option to pay taxes at a concessional rate (new slab rates) from FY 2020-21 onwards. Any individual/ HUF opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions. Since, individuals/ HUF opting for the new tax regime are not eligible for Chapter VI-A deductions, the investment in ELSS Funds cannot be claimed as deduction from the total income.

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'

ELSS funds have a fairly short lock-in period.

An equity mutual fund portfolio is designed to perform over the long term. ELSS fund on the other hand comes with a statutory lock in of three years. Investors are obliged to remain invested for a minimum period of three years to seek tax exemption on the invested sum. A three-year lock in can actually help the investor’s portfolio grow. Also, ELSS has a short lock-in as opposed to other investment avenues under Section 80C where the money is locked in for a much longer duration.

Invest and save tax at the same time

When you invest in an ELSS fund, you invest in diversified portfolio stocks that have the potential to add value and growth in the long run. While savings alone may fetch you some fixed income, ELSS increases your chances of earning better capital appreciation in the long run. And while all this happens, you simultaneously continue to save tax year after year. Investing in an ELSS fund that invests in credible stocks may allow the investor’s portfolio to grow sizably in the long run.

Get regular with SIP investments

ELSS is an affordable investment scheme that allows investors to start with a very low sum. Thanks to the introduction of the Systematic Investment Plan (SIP) option, it is now possible for an individual to save and invest a fixed sum at periodic intervals in ELSS funds. The minimum SIP investment is usually low, and this makes it possible for almost anyone with a taxable income to invest in this tax saver fund.

Axis Long Term Equity Fund
An open ended equity linked saving scheme with a statutory lock-in of 3 years and tax benefit

Investment objective
The investment objective of the scheme is to generate income and long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities. However, there can be no assurance that the investment of the scheme will be achieved.

Benefits
• Axis Long Term Equity Fund is a diversified equity linked saving scheme (ELSS) that invests in a mix of large caps and select midcaps
• The fund has a 3-year lock-in which is the lowest among other tax saving instruments
• A 3-year lock-in ensures that the money stays invested in equities and does not get perturbed by market ups and downs
• Being an ELSS scheme, the scheme comes with dual advantage of building wealth and saving tax
• Investors can target long term goals such as children’s education and their future, retirement, or any other long term financial plan
• Axis Long Term Equity Fund has a 3-year lock-in which is one of the lowest amongst other tax saving instruments

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.