ET In The Classroom: Investing in ELSS funds
tax regime can consider ELSS funds to invest up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Wealth managers say flows can be staggered using systematic investment plans (SIPs) from the first month of the financial year rather than parking lump sum towards the closing of the year.
WHAT IS AN ELSS SCHEME? ELSS or Equity-Linked Savings Scheme is a mutual fund category that primarily invests in equity. This benefits investors choosing the old tax regime as investments up to Rs 1.5 lakh are exempt under Section 80C of the Income Tax Act. Financial planners recommend these schemes to first-time investors for the twin benefits of saving tax and taking exposure to equity as an asset class. Investments in these schemes are locked in for three years from the date of investment. Investors are free to redeem the investments or continue holding them after the lock-in ends.
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View Details» <div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-109546364»>WHY SHOULD YOU OPT FOR A SIP IN AN ELSS FUND? SIPs give you the benefit of rupee cost averaging, and help you even out volatility in the markets. It gives you the flexibility of choosing the amount you wish to invest and instils discipline. Since an ELSS investment is time-bound a SIP should be started in the first month of the financial year. Starting it later will lead to fewer instalments as investors need to park Rs 1.5 lakh by the financial year-end and won’t be able to spread it over a longer duration.
HOW DOES AN ELSS FUND WORK? ELSS
