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Sunday, September 28, 2014

Advantages of ELSS Mutual Funds

 

Advantages of ELSS Funds - Invest Online

Make the most of the multiple benefits of tax savings, equity exposure, diversification and growth with ELSS funds

One fund, many benefits. That in a nutshell is what funds in the equity linked savings scheme (ELSS) category are. This unique fund category, is the only one that is open to retail investors and HUFs, are open-ended and have equity exposure. A fund qualifies to be an ELSS if it invests more than 65 per cent in equity, has a three-year lock-in on investments and has the necessary approval from the tax authorities to qualify as a tax planning scheme.

 

From this year, this fund has another attraction added to its already long list; the investment limit in this fund which qualifies for tax benefits under Section 80C of the Income Tax Act, 1961 has been increased by R50,000 to R1.5 lakh, which is deductible from taxable income.

These funds offer an interesting choice to investors with the advantage of earning higher returns along with tax deduction benefit under Section 80C but come with a caveat in the form of a three year lock-in. These funds provide equity exposure and are an alternative to other tax saving instruments like NSC, PPF and fixed deposits.

 

There is wide variety within this category with funds that have a mid-cap tilt at one end and those with a small-cap tilt at the other. What effectively you have in these funds is a stepping stone to equity investments.

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