Explained: What is ELSS Mutual Fund?

Are You an Investor looking for a dual benefit of Tax Saving and wealth creation?

As an investor in Mutual Fund, we always have multiple choices regarding our investment decision.

So, as investors, we have to take the right choice that caters to our financial goals.

If you are looking for wealth creation & tax saving investment options, then investing in ELSS Mutual Fund helps you achieve that financial goal. Let’s see how?

Table of Contents:

1.) What is an ELSS Mutual Fund?
2.) What are the advantages of ELSS Mutual Fund?
3.) What factors should we consider before investing in ELSS Mutual Fund?
4.) What is the tax liability of ELSS Mutual Fund?

What is an ELSS Mutual Fund?

ELSS Mutual Fund is one such special category of Mutual Fund that allows the dual benefit of Tax Saving and Wealth Creation.

ELSS Mutual Fund full form -:  Equity Linked Saving Scheme

In this saving scheme, 65% of the asset gets invested in Equity & Equity related investment schemes.

It provides an investor with the opportunity to invest across various Market Cap & Industrial sectors.

It has the potential to generate an inflation-beating return in the long run. And in comparison to other 80C options like PPF and ULIP, it has the shortest lock-in period of 3 years.

What are the advantages of ELSS Mutual Fund?

There is no single mutual fund that can cater to the financial needs of different people.

Now let’s see the features of the ELSS mutual Fund and check whether it suits our investment portfolio.

Features of ELSS Mutual Fund:

• Investors will get benefitted from investing across the market cycles.
• It has the potential to generate an inflation-beating return in the long run.
• It provides investors with the dual benefit of Wealth Creation & Tax Saving at the same time.
• The Lock-in period ensures that you stay invested for at least 3 years.
• In comparison to other saving schemes like PPF & ULIP, it is more beneficial to investors. 
• It gives you the flavour of equity in your investment portfolio.

What factors should we consider before investing in ELSS Mutual Fund?

After reading about the advantages of the ELSS mutual Fund, we will be more inclined to choose this particular fund.

But here are a few factors that we should consider before opting to invest in ELSS Mutual Fund.

• It is suitable for an investor with long-term Financial Goals.
• Only investments less than or equal to 1.5 lakhs will be provided with tax benefits.
• You should be aware of the lock-in period of 3 years.

What is the tax liability of ELSS Mutual Fund?

If your ELSS Mutual Fund is sold within a year, it is known as Short-Term Capital Gain. And this Short-Term Capital Gain will be taxed 15% on the gain.

Otherwise, your ELSS Mutual Fund becomes a Long-Term Capital Gain, and anything below 1 lakh is exempted from tax.

A Long-Term Capital Gain of over 1 lakh will attract a 10% of tax.

The video below will help you understand in depth about this category of Mutual Funds.

What are ELSS Funds? – Watch here!

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