Senior citizens often have specific financial goals when they consider investing in mutual funds. They look for options that not only protect their capital but also provide a steady income, easy access to funds (liquidity), and tax advantages.
Among the various tax-saving mutual fund schemes, the Equity Linked Savings Scheme (ELSS) stands out. ELSS mutual funds offer both growth potential and tax exemptions under Section 80C of the Income Tax Act.
What is an ELSS Fund?
ELSS (Equity Linked Savings Scheme) is a type of equity mutual fund in India. “These funds have a mandatory lock-in period of three years, during which at least 80% of the fund’s assets are invested in equities & the remaining is allocated to debt instruments. ELSS funds are famous due to their dual benefit of growth from equity investments and tax savings. Investors can claim deductions of up to Rs 1.5 lakh from their taxable income under Section 80C,” informs Girish Kumar, Research Team, Share India Securities Limited.
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Key Features of ELSS Funds
- Equity Investment Focus: At least 80% of the fund is invested in equity or related instruments and the rest 20% in debt instruments.
- Diversification: The funds are spread across various market sectors, themes, and capitalization sizes.
- Lock-in Period: A minimum investment lock-in of 3 years is required, although there is no maximum holding period.
- Tax Benefits: Tax exemptions are available under Section 80C, and returns are taxed as Long Term Capital Gains (LTCG).
- Wealth Creation Potential: While offering tax efficiency, ELSS funds allow your investments to grow steadily over time.
The Best Part:
The lock-in period ensures your investment remains stable for at least three years, allowing it to grow without the impact of short-term market fluctuations.
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