ELSS funds have the least lock-in period and they have the potential to offer superior returns than other options
24-Sep-2015 •Research Desk
I am 22, and I just started investing in mutual funds. I want to know the difference between Equity Linked Savings Schemes (ELSS) and regular mutual funds from tax viewpoint.
I am currently investing ₹5,000 per month via SIPs, but none of those schemes are ELSS. Thus, if my annual PPF subscription is below ₹1.5 lakh and NPS contribution of 50,000 annually is separately deduced under Section 80CCD(1B), and I don't use any other tax-saving instruments (house loans, insurance, etc.), then I must invest the remaining amount in ELSS to avail ₹1.5 lakh exemption under Section 80 (C). Am I right?
- Abhijit Nayak
Equity Linked Savings Schemes or tax planing mutual fund schemes qualify for tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. They come with a lock-in period of three years. Regular mutual funds do not qualify for tax deduction under Section 80 C.
If you are not utilizing the maximum deduction available under Section 80C, you can consider investing in ELSS. These schemes have the least lock-in period and they have the potential to offer superior returns than other investment options available under Section 80C.