An ELSS (Equity Linked Savings Scheme) is a mutual fund that has to invest a minimum of 80% in Equity Shares. The balance 20% can be in debt, money market instruments, cash or even more equity. There is a 3 year lock-in period for the ELSS mutual funds. Post the 36 months, the funds remain invested and work like any other open-ended mutual fund.
It has been an established fact that in the long run equity gives a much higher inflation adjusted returns when compared to any other investment except for maybe real estate. The top 5 ELSS funds have given returns from 22% to 26% compounded annually over the past 5 years. This is again higher than the market (Nifty) returns over the past 5 years which is at 19%.
ELSS is part of the Section 80C instruments which are cumulatively eligible for a deduction from income up to Rs.1L. This gives the tax payers benefits from 10% to 30% (excluding the educational cess) based on their current tax slab.
The return (maturity and the dividend [(if opted for]) from the ELSS is also tax free under the present EEE (Exempt - Exempt - Exempt) regime.
The 3 year lock-in period makes sure one stays invested. Otherwise in a normal mutual fund one tends to withdraw in case of any monetary requirement.
The lock-in period also helps the fund managers to plan their investments better and also to hold on to valuable investments as they do not have to worry about sudden redemption pressures.
The above logic is proved in the higher returns achieved by the ELSS funds when compared to the market returns. Wealth creation because of this is much better than most of the other mutual funds. Only some sector based mutual funds have given better returns than the ELSS fund in the past 5 years.
Insurance & Investment Shoppee takes this opportunity to introduce itself as a trustworthy Service Provider offering a comprehensive range of Financial Saving Consultancy Services. The extensive assortment of services which we render includes Insurance Consultancy, Mutual Fund Consultancy, Share Trading Consultancy, and Commodities Trading Consultancy. We assist the clients envision and shape their growth by providing them with an investment which can serve them profitably all throughout. We, at Insurance Shoppee, have been simplifying Insurance and Investment Decision making since 2005. Today, we are proudly serving more than 5000 customers in a year. This has been made possible by our team of expert advisors and consultants who proctor every minute detail of policies bonds and funds before asking you to make an investment. The trust of our valued clients that we have achieved over the years is our most valuable asset.. view more »