ELSS is termed as equity linked savings scheme. In short it is a diversified investment incorporated in a mutual fund scheme. Though the ELSS lock in period is of 3 years it gives you the benefit of tax benefits and capital appreciation.
The reasons for you to choose ELSS?
If you plan in an efficient manner ELSS can lead to considerable savings on the money aspect. They are tax free as you do not need to pay any tax on principle and even the maturity amount. As far as withdrawals are concerned it is also free as there is a one year lock period. You are not going to pay any tax on the capital gains. As per your preferences you can opt for 3 plans
- Dividend plan
- Growth plan
- Dividend reinvestment plan
The choice of a fund
In the market there are various options as far as choice of funds is concerned. It would be a sensible move if you choose the funds as per your preferences. At no point you should stop comparison of funds before you plan to purchase one.
Diversification
In the field of securities diversification is a vital cog in the wheel. But if you are planning to invest for a longer period of time it might prove to be beneficial. Say in case if one of the sectors is not performing well, a possibility exists of diversifying your funds to another sector.
Inflation
Any money invested is beneficial for future use. In due course of time, inflation starts spreading and expanding their wings. At this point of time the returns are expected to be on the lower side
Patience
The value of shares you have gone on to invest would rise and fall, so be prepared to face up to such fluctuations.
Age
For a youngster to invest in stocks is a better idea as they are in a position to devote a lot of time to stocks. This investment in stock promises assured returns over a definite course of time.
Risk
When you are about to choose mutual funds consider the risk you have to take. Be in control over things and do not cut down on the comfort zone. In case if you are close to retirement it is sensible to cut down on the risk aspect.
To conclude as an investor you are exploring the option of flexibility when it comes to ELSS schemes. Among the various taxes saving instruments this has gone on to become a lot popular in the last 3 years. In fact there are various benefits of investing in ELSS. First and foremost you are entitled to a tax rebate of 1.5 lakhs under section 80 C of the Income Tax act. When you compare it to the other type of financial instruments like PFF or NSC there is a lock in period of 3 years. This means that you are entitled to the funds after 3 years of investing in this scheme.
