What is ELSS Fund – Tax Saving Mutual Fund ? And What are the different types of Elss Funds?
ELSS stands for Equity Linked Saving Scheme, which is a type of tax-saving mutual fund investment option available in India. It is an investment in equity funds with a lock-in period of 3 years, which means the money invested cannot be withdrawn before the lock-in period. ELSS funds provide investors with an opportunity to save taxes while investing in the stock market.
ELSS funds invest a minimum of 80% of their assets in equity and equity-related instruments, which makes them a high-risk investment option. However, they also offer the potential for high returns due to the equity component.
Under Section 80C of the Income Tax Act, investments in ELSS funds are eligible for a tax deduction of up to Rs. 1.5 lakhs per annum. The returns generated by ELSS funds are also tax-free, making them an attractive option for tax-saving investors.
ELSS funds come with a lock-in period of 3 years, which means the investor cannot withdraw their funds before that period. However, after the lock-in period is over, the investor can choose to redeem their investment, either in a lump sum or in installments.
Investors can invest in ELSS funds through various online and offline platforms like mutual fund distributors, direct mutual fund platforms, and stockbroking firms. It is always advisable to consult with a financial advisor before making any investment decisions.
Different types of Elss Funds :
ELSS funds can be broadly classified into two types based on their investment style:
Growth ELSS funds: Growth ELSS funds invest primarily in companies that have the potential to generate high growth rates in the future. These funds typically invest in companies with a high market capitalization and a strong growth potential. Growth ELSS funds are suitable for investors with a long-term investment horizon and a high risk appetite.
Value ELSS funds: Value ELSS funds invest primarily in companies that are currently undervalued by the market, but have the potential to generate higher returns in the future. These funds typically invest in companies with a low market capitalization and a strong underlying business model. Value ELSS funds are suitable for investors who are looking for a more conservative investment approach, with a focus on the long-term potential of undervalued companies.
It is important to note that ELSS funds may also differ in terms of their investment objective, investment style, asset allocation, and other parameters. Therefore, It is essential to evaluate the fund's performance, portfolio quality, and management before investing in it. Additionally, investors should consult with a financial advisor before making any investment decision.
