How do you benefit from ELSS Mutual funds?

There are various ways you would benefit from ELSS mutual funds.

1) ELSS mutual funds help you to grow money: Since ELSS mutual funds invests in equity related instruments, these schemes would help you to grow your money when the stock market grows over a period of time.

2) Save tax u/s 80C up to Rs 1 Lakh: By investment in ELSS mutual funds, you are eligible for tax exemption up to Rs 1 Lakh u/s 80C. If you have not utilized 80C fully, this is a good opportunity to invest in ELSS funds.

3) Lock-in period of 3 years: ELSS mutual funds come with lock-in period of 3 years. Generally, investors would get tempted to take out the money from any investment option as soon as they get some good returns. They would not wait for long term to enjoy long term benefits. Since ELSS MF’s come with a 3 year lock-in period, you are forced to keep your investment for a minimum of 3 years. This would help you to grow your money that considers market fluctuations.

4) ELSS returns are tax free: If you observe, none of the returns from tax saving investment options other than PPF are tax free. NSC, Tax Saving Bank FD, Tax saving Post office TD scheme etc. all these tax saving option returns are taxable based on individual tax slab. However, interest in Public Provident Fund is tax free, but that comes with a 15 year lock-in period (apart from certain exemptions to withdraw in between). The only tax saving investment option that provides tax free returns for short period is ELSS Mutual funds. Since ELSS mutual funds invest in equity related instruments, these are classified under equity funds. Any returns received from equity funds after 1 year is tax free, hence ELSS funds which comes with a 3 year lock-in period, dividends/returns/capital gains from such funds are also tax free.