Investing in an ELSS fund is similar to investing in some other funds. You can invest as high as you want to. The minimum limit also starts from 500 INR.
But also investment can be a little bit tricky for you if you are a beginner. It is better to understand the whole system of ELSS mutual funding before investment. In this article, we will provide you with complete guidelines regarding how to invest in ELSS mutual funds and how much you can grow by investing in ELSS schemes. So read the article carefully.
What Is ELSS?
ELSS stands for Equity Linked Saving Schemes. These are the types of mutual funds investment that can help you to save your income from tax. So it is suitable for long-term investments. According to the income tax act 1961, under section 80C, tax deduction occurs up to 1.5 lakh per annum. These mutual funds are therefore categorized as tax-saving mutual funds. It gives maximum opportunities for investors to invest in equity.
Only those investors should invest in these mutual funds who can wait for the long term to gain huge returns and for those who possess strong knowledge of these mutual funds. These funds can be the best opportunity for young investors as they can receive a good amount of returns without paying huge taxes.
Why Invest In ELSS Funds?
Many reasons will force you to invest in ELSS funds. Let’s talk about these.
You can easily save a huge amount of money by claiming a tax deduction of up to 1.5 lakh. Not all mutual fund investment provides this opportunity to their investors. So, you should consider ELSS equity funds.
A short lock-in tenure
Many companies are providing mutual funds investment opportunities but their lock-in period is approximately 15 years. That is too long a period. But while using mutual funds, you can get the benefit of a shorter lock-in period, only 3 years. This plus point of ELSS mutual funds makes it preferable to use over many other investment companies.
You can easily invest in ELSS mutual funding by using SIP. You can start your investment with 500 INR. And after some time you can increase your investment amount by using a SIP top-up. ELSS investment provides a systematic way to invest and earn.
ELSS mutual funds give 12% returns within10 years. ELSS funds returns are double as compared to any other mutual funds investment company. Income tax exemption also helps to increase wealth growth and revenue.
How to invest in ELSS?
You can invest in ELSS mutual funds via SIP ( systematic investment plan) and online investment services account.
Invest through SIP. It will provide you with a variety of benefits like SIP top-ups or monthly SIPs. Monthly investment via SIP is a good option rather than investing your whole money at the end of the year.
Go for long-term investments
While investing it is better to check long-term investment performance. Don’t be betrayed by checking the short-term performance of a company. Deep research and analysis are very important while investing in ELSS funds.
Avoid using the dividends option
According to tax rules, taxes are imposed on dividends as compared to capital gains. So, don’t go for it. To avoid taxes it is better to go for capital gains rather than dividends.
Maintain your portfolio
A good investor manages and maintains his portfolios from time to time even in the case of long-term investments.
- To invest in ELSS mutual funds, a person must have mutual funds KYC compliance. If a person does not have KYC compliance then he can fill his KYC form online on the RTA website or any mutual funds investment. To make KYC online, you just need your national ID card, and address proof which could be any utility bill. After your documents are verified, you need to upload your selfie.
- You can also invest in ELSS mutual funds offline. To do this, hire any mutual funds distributor, who will guide you the whole way.
- If you already have KYC compliant then the investing process will be pretty much simpler. Just select the plan, in which you planned to invest, and select the dividend option or growth option. And aat lat select SIP or lump sum. After selecting all this, you can pay via a bank account.
- Before investing you must select good mutual funds investment schemes, fewer investment amounts, and direct or regular plans.
Frequently Asked questions
Which mutual fund is best for ELSS?
Best mutual funding depends on financial goals, investment amount, and risk-taking capacities. Some best mutual funds are
- Axis long-term equity fund.
- DSP tax saver fund
- Mirae asset tax saver fund
- Kotak tax saver
- UTI long-term equity fund
- SBI magnum tax gain scheme
Is ELSS taxable after 3 years?
A person can also invest after the completion of a three-year lock-in period. After three years, it also provides opportunities for investors to redeem tax. A tax deduction is up to Rs 1.5 lakh per annum. Only the investors pay 10% LTCG tax after three years.
How do you invest in ELSS step by step?
- The first step is to decide your tax slab and taxable income. A person should already know how much he is willing to invest in mutual funds. Income tax percentages must also be calculated before investment.
- Then select the best mutual funds to invest in. While selecting the best ELSS mutual funds, it is suggested to go for that fund that provides high returns and low-income tax. It may include the DSP tax saver fund or the Mirae asset tax saver fund.
- After choosing the best mutual funds, choose an intermediary through which you want to invest. If you are choosing the online option to apply for ELSS then investment will be through online share trading distributors. While in case of offline less buying, mutual funds distributor will help you.
- Select the option of SIP or lump sum investment.
- The last step is the redemption of ELSS mutual funds.
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