What is ELSS?

Most of us during the month of march rush up to our auditors or financial planners for tax planning to invest upto 1 lac which qualifies for tax exemption under section 80 (c) . Most of us end up in paying LIC premium,PPF,NSC,5 year bank FDs and other traditional tax savings instrument. Let us go through one another option available to us - ELSS

ELSS - Equity Linked Savings Scheme is a type of mutual fund which is qualified for tax exemption under section 80 c. Lets dig into more information on this scheme.

Features

1. It is a mutual fund with a lock in period of 3 years. The lock in period of 3 years is much lesser than lock in period of 15 years in PPF and 6 years in NSC or 5 years in bank FD.

2. It is a equity diversified fund and hence the returns over a longer period of time is higher than the fixed income instruments like PPF,NSC.

3. With high returns, comes high risk associated with the investment.Hence if you are an investor who does not want to take any risk with your investment, you can avoid ELSS.

4. You can invest upto 1,00,000 in ELSS for getting tax exemption.

5. You can invest periodically via SIP option and that brings in discipline and cost averaging in your investment.

6. You can opt for dividend option and get some money out of the scheme even during the lock in period. This is not possible in PPF or NSC in a duration of 3 years from investment.

So start exploring the various ELSS schemes in the market and choose a one with good track record and a good rating. You can refer http://valueresearchonline.com/ for fund ratings