What are Tax Saving Funds?
Tax Saving Funds or ELSS (Equity Linked Savings Scheme) are mutual fund schemes that provide tax deductions U/S 80C of the Income Tax Act of 1961 . By investing in ELSS mutual funds you can get tax rebate of up to Rs. 1,50,000 and tax savings of up to Rs. 46,800* annually. The key advantages of ELSS Mutual funds are that they offer tax benefits and growth potential of the equities at the same time.
Why Invest in Tax Saving Funds?
ELSS offers many advantages over traditional tax-saving options like Term Deposits, ULIPs, PPF etc. In comparison to other tax-saving plans, they have the shortest lock-in time and higher growth potential of equities. Investing in ELSS is very easy as you can invest in lumpsum as well as through SIP with as little as Rs 1000. Additionally, through SIP you have the flexibility of investing Rs 12,500 monthly rather than Rs 1.5 lakh all at once if you wish to receive the entire tax benefit for investing in these funds.
Since ELSS mutual funds invest in equity-related instruments, these schemes would help you to grow your money over a period of time.
Save Tax u/s 80C up to Rs 1.5 Lakh
By investing in ELSS mutual funds, you are eligible for tax exemption up to Rs 1.5 Lakh u/s 80C.
Shortest Lock-in period of 3 years
ELSS mutual funds come with the shortest lock-in period of 3 years with comparison to other tax saving investments.
Tax Free Returns
Returns from the ELSS up to Rs 1 lakh in a financial year are tax-free, and exceeding this limit attracts LTCG tax at the rate of 10%.