Tax Saving Mutual Funds – ELSS Returns & Tax Benefits
Looking for a smarter way to save on taxes and grow your money? ELSS funds (Equity Linked Savings Schemes) are a popular choice for those seeking a reliable tax-saving investment. These funds let you invest in equity markets while offering tax benefits. It’s a simple and effective way to build wealth over time while reducing your tax outgo. Have a look at the tax-saving funds below and see how they can fit your investment plans.
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What is tax-saving funds?
Tax-saving funds, also known as ELSS (Equity Linked Saving Schemes), are a type of mutual fund that allows you to save tax under Section 80C of the Income Tax Act. These funds primarily invest in shares of companies, offering the potential for your money to grow over time. By investing in ELSS, you can claim a tax deduction of up to ₹1.5 lakh in a financial year. One key feature of ELSS is its 3-year lock-in period, during which you cannot withdraw your investment. Overall, ELSS funds are a smart choice for those seeking a tax-saving investment with the added benefit of long-term wealth creation.
Advantages of tax-saving funds
Here are some simple benefits of investing in ELSS funds:
Tax Savings: You can save up to ₹46,800 in taxes every year (depending on your tax slab).
Short Lock-in Period: The 3-year lock-in is the shortest among all 80C options like PPF, NSC, or FD.
Good Return Potential:Since the money is invested in shares, the returns can be better than fixed deposits or other traditional options.
Start Small: You can begin with as little as ₹500 per month through SIP (Systematic Investment Plan).
Wealth Creation: Over the long term, ELSS can help grow your money while saving taxes at the same time.
Risks to Keep in Mind
Like all investments, ELSS funds come with some risks too. It’s important to know these before you invest:
Market Ups and Downs: Since these funds invest in shares, their value can go up or down depending on the stock market.
No Early Withdrawal: You can’t take the money out before 3 years, even if you need it urgently.
Returns Not Guaranteed:Unlike fixed deposits, the returns can vary and are not fixed.
May Lose Money: There’s a chance that the fund may not perform well and you could lose some of your investment.
So, while ELSS can be a great tax-saving investment, you should invest only if you’re okay with some amount of risk.
How to choose right tax-saving fund
Picking the right ELSS fund is important. Here are a few tips to help you make a better choice:
Check Past Performance: Look at how the fund has done in the last 5 to 7 years.
Know the Fund Manager: A good fund manager makes smart decisions that can improve your returns.
Low Charges: Pick funds with lower expense ratios so more of your money is invested.
Diversification: Choose a fund that invests in different sectors and types of companies.
Your Risk Level: Go for a fund that suits your comfort with market ups and downs.
Reputation: Stick to funds from well-known and trusted mutual fund companies.
Doing a bit of research can go a long way in finding a fund that fits your needs.
If you’re looking for a way to save on taxes and build wealth, ELSS funds are worth considering. They offer tax benefits, the chance to earn better returns and don’t require a huge investment to get started. Like all investments, there are risks, but if you stay invested for the long term, tax-saving funds can help you meet your financial goals while lowering your tax bill.
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FAQs
Tax-saving mutual funds are a smart investment option that not only help grow your money but also reduce your tax liability under Section 80C of the Income Tax Act.
These funds invest primarily in equity and related instruments.
The most popular tax-saving mutual fund is the ELSS (Equity Linked Savings Scheme).
You can claim a tax deduction of up to ₹1.5 lakh in a financial year.
They come with a lock-in period of 3 years, which is the shortest among all tax-saving options under 80C.
At AUM Securities, we help investors choose the right tax-saving investment options through expert advice and easy access to top-performing ELSS funds.
An ELSS (Equity Linked Savings Scheme) is a type of mutual fund designed to help you save tax while investing in equity markets for long-term wealth creation.
ELSS funds primarily invest in equity shares of listed companies.
They qualify for tax deductions under Section 80C, up to ₹1.5 lakh annually.
Returns from ELSS are market-linked and have the potential for higher growth.
They have a mandatory lock-in period of 3 years from the date of investment.
At AUM Securities, we simplify ELSS investing by guiding you through fund selection and online investment processes.
Yes, tax-saving mutual funds like ELSS have a lock-in period, which means your investment cannot be redeemed for a fixed time.
ELSS funds come with a 3-year lock-in period, the shortest among tax-saving options.
During this time, you cannot withdraw or switch your units.
After 3 years, you are free to redeem your investment partially or fully.
The lock-in encourages long-term investing and potentially higher returns.
AUM Securities offers ELSS investment services with complete clarity on lock-in rules and redemption options.
Investing in ELSS funds online is simple, secure, and convenient with AUM Securities.
Start by completing your KYC (Know Your Customer) process, if not already done.
Choose from a list of top-rated ELSS funds available on our platform.
Decide whether to invest a lump sum or set up a SIP (Systematic Investment Plan).
Track and manage your investments easily through our online dashboard.
AUM Securities provides a seamless digital platform for ELSS investment, supported by expert assistance every step of the way.
It is not possible to withdraw your ELSS investment before the lock-in period of 3 years.
Each individual investment (or SIP instalment) is locked in for 3 years.
Premature withdrawals are not allowed under any circumstances.
After the lock-in, you can choose to stay invested or redeem your units.
Planning ahead is essential due to the fixed lock-in period.
At AUM Securities, we help you plan your tax-saving investments effectively so that you invest with confidence and clarity.
Yes, NRIs (Non-Resident Indians) are eligible to invest in ELSS mutual funds in India, subject to certain conditions.
NRIs can claim the same tax benefits under Section 80C as resident Indians.
Investments must be made in Indian Rupees from an NRE or NRO account.
Some ELSS funds may have restrictions for US and Canadian NRIs, depending on fund house policy.
All investments are subject to Indian tax laws, including capital gains tax.
AUM Securities supports NRI investors in making compliant and profitable ELSS investments for tax saving and wealth creation in India.
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Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: https://www.nseindia.com/invest/about-defaulter-section. -
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