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Home / Money / Personal Finance /  ELSS mutual funds: Top 5 reasons to invest in equity-linked saving schemes
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ELSS mutual funds: Equity linked saving schemes are tax saving mutual funds, which helps an investor beat inflation growth in long term. This tax saving scheme is an equity mutual fund with three year lock-in with income tax benefit under section 80C of the income tax act. Like any other equity mutual funds, an investor can invent in ELSS mutual funds in SIP mode with minimum monthly SIP of 500.

Speaking on ELSS mutual funds, Sujit Bangar, Founder at Taxbuddy.com said, "ELSS mutual fund is a good instrument option for equity investors who want to save tax and grow wealth in tandem. It is a tax saving mutual funds investment instrument as an investor can claim tax exemption under section 80C on up to 1.5 lakh investment in single financial year."

Sujit Bangar of Taxbuddy.com listed out following 5 reasons that makes this tax saving mutual funds a good investment option for an earning individual:

1] Three years lock-in: It comes with lock in of three years. So automatically you stay invested for longer duration to get good returns.

2] Direct funds option: Like any equity mutual funds, ELSS mutual funds too provide direct fund option to an investor. With lower expense ration, these mutual funds allow maximum investment as expenses in such mutual funds are very low.

3] Exposure to equity investment: "ELSS is good way to get exposure of equity market. I think it’s first step towards building equity as asset class in your portfolio," said Sujit Bangar.

4] Provision for tax free income: The gain which you earn on ELSS are tax free to the extent of Rs. 1 lakh in one year. If gain is exceeding beyond one year, the gains would be taxed at 10 per cent.

5] SIP option: ELSS can be started with as low monthly SIP as 500. So it makes easy to start on habit of saving.

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