What is ELSS and what are the benefits of investing in ELSS mutual funds?

ELSS stands for Equity-Linked Savings Scheme that is similar to the other mutual funds' schemes that invest in the stock market. The difference between the other mutual funds and ELSS is that ELSS comes with a lock-in period. This means that ELSS cannot be sold before the lock-in period with is generally three years. In the case of ELSS, the SIP is locked for a fixed period. This indicates the fact that there will be a different maturity date for each of the investments that are being made.

ELSS offers a minimum of three years of the lock-in period, which makes it a decent investment choice, especially for the younger generations. People in their late twenties and early thirties are considered a high-end market for ELSS funds.

Why ELSS is often called the tax saving mutual funds?ELSS (Equity Linked Saving Schemes), which is also known as tax saving mutual funds comes under section 80CC of Income Tax. We can save up to Rs. 46,800 (tax deduction of up to Rs.1, 50,000 from total income) a year. We can save tax as well as gain high profits. They have a short lock-in period (11-14% return in 3 years) compared to PPF, NSC, EPF (minimum 5 years). Even though high returns are taxed, ELSS is a better option compared to other savings plans such as PPFs (Public Provident Funds) and ULIPs.

Why should you invest in ELSS mutual funds?There are several benefits of investing in mutual funds when it comes to investments in ELSS. To start with, ELSS is one investment that would allow savings on mutual fund taxation. Another beneficial factor is that such investment allows ease when it comes to investments. SIP can be used for investment in the circumstance when you are not willing to make a lump-sum investment. Alongside the investment also allows a better post-tax return.

Planning your tax on timeIt is essential that planning on tax is rightly done for security in the long run. While the financial year is about to start and you have not planned your tax than the chances are that you will face a huge deduction on the tax. This is the very time ELSS can be of a rescue. Though it is like any other mutual fund investment the lock-in period is one of the reasons why any investor can have better returns in the long run.

Wrapping upYou are never too old to invest in Mutual Funds and never too young to secure your future. Early investments assist you towards a sound future. As ELSS ensures a lock period of three years, it would be safe to invest once you have contemplated your next three years. This is recommended so as to gain most out of the scheme.

It is essential that planning on tax is rightly done for security in the long run. While the financial year is about to start and you have not planned your tax than the chances are that you will face a huge deduction on the tax. This is the very time ELSS can be of a rescue. Though it is like any other mutual fund investment the lock-in period is one of the reasons why any investor can have better returns in the long run.

Here's a little bit about myself. I've done a Masters in Economics and teach the subject to high school students. I am 32 years old and married to an investment advisor. A Dhoni fan who loves to play football! I am a sports enthusiast and a firm beli