ELSS offers the best of both worlds – investments and tax saving
- Take advantage of current market conditions by investing into a good Equity Linked Saving Scheme (ELSS) fund that gives you both tax advantage and the gains from Capital Markets.
It’s the time of the year again when one has to start thinking of tax planning. Don’t wait for the last minute and take advantage of current market conditions by investing into a good Equity Linked Saving Scheme (ELSS) fund that gives you both tax advantage and the gains from Capital Markets.
An ELSS is a mutual fund that maintains a portfolio largely in stocks, giving you the advantage of gains in the equity market which will reflect in your portfolio. In addition, you can take a benefit under section 80C of the Income Tax Act and save up to ₹46,800 a year for the financial year on this investment.
It gives you a diversified portfolio that reduces the risk of volatility in the stock markets, yet offering the advantages of higher rate of returns when there is an upside. Ideally, the rate of return on your investment must beat the existing inflation rate. This is possible with equities which not only beat inflation but also create wealth for you in the longer term.
The scheme is an actively managed fund, that is handled by a professionally capable fund manager who has the expertise to buy and sell securities and shares to meet the overall investment objective of the scheme. This ensures that your money is in the hands of a qualified professional.
An ELSS is a preferred choice amongst investors with a very high risk appetite as it offers the potential of earning a high rate of return even as the lock-in periods for the investments are relatively shorter at three years. A lock in typically means that you cannot redeem the investment before three years from the allotment date.
This lock-in in an ELSS investment allows you to leverage the power of compounding. Your money stays invested for the period of the lock in giving it time to tide over the ups and downs of the market and grow.
Furthermore, to realise the full potential of your investments with the aim of getting good returns, it is recommended that an ELSS investment is not redeemed at the end of the lock-in period. As an investor, you can take stock of the Market conditions and continue to remain invested in the scheme for as long as you desire enabling you to gain benefits of a long-term portfolio in Capital markets.
This also makes it an effective tax saving option as it offers you the option to invest a fixed sum periodically, allowing you to plan your investments and taxes well in advance. Alternatively, you can even invest a lump sum amount offering flexibility, and there is no maximum cap on this amount.
As an investor, you can either choose a dividend plan to earn a regular dividend during the three-year lock in period or choose a growth plan, which offers you the option to earn a lump sum upon completion of the lock-in period. Some schemes also offer the choice to switch from a dividend plan to a growth plan if you are unable to meet the investment.
Axis Long Term Equity Fund has a short lock in period, offers tax benefits, and is also suitable for long-term goals such as children’s education or building a retirement corpus, as it allows you to stay invested even after completion of the lock-in period, offering the gains from a long-term investment in the Equity market. Depending on your pocket, you can opt for a SIP or a lump sum payment to enter into this equity linked scheme.
Axis Long Term Equity Fund (An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit) offers the following benefits:
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.