Features

Equity Linked Savings Scheme (ELSS) - An Efficient Tax-Saving Tool

An ELSS fund is essentially an equity fund with a three year lock-in period. This means that you cannot redeem your investment in the fund for the first three years. This may seem restrictive, but the lock-in period can actually work to your advantage.

How?

The fund manager has the freedom to deploy a larger portion of the portfolio in equities (which have the potential to perform better over the long term) as he does not need to hold large amounts of cash to service redemptions. Though equity funds may seem volatile in the short run, they have been known to create wealth and beat inflation in the long run. Therefore, ELSS is an ideal tax saving option.

Previously, investors were required to invest in different instruments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC) and Infrastructure Bonds. However, now the investor can simply invest the entire limit of Rs.100,000 available under Sec 80C into ELSS.