Core Features of ELSS Tax Saving Mutual Fund

Equity Linked Saving Scheme (ELSS) is a form of mutual fund scheme that invests mainly in the equity market. It is a diversified mutual fund that invests most of its block equity and related funds, while providing tax benefits to investors under Section 80C of the Income Tax Act, 1961. ELSS is, in most cases, a diversified scheme that offers a balance between volatility and returns to investors.

More aspects of the ELSS Tax Saver Fund are as follows. Investors can choose to invest in ELSS from various options. However, the choice depends on the knowledge and market experience of the investor. There are two options for investing in ELSS. Investments can be made in a direct scheme or a regular scheme.

Direct Mutual Fund Scheme – Investors opting for this scheme should manage and maintain their own fund assets. On paper route, direct shareholders should visit the representative branch of the respective fund house along with all relevant documents. A significant benefit of this type of investment is the low ratio of expenditure as they can save money on commissions paid by distributors of mutual funds. Many fund houses charge fees at nominal rates, but in the long run, it adds up to vast amounts of money. Therefore, this investment option is best for investors who have a good understanding of the market and have the time and resources to devote their funds to monitoring and management. The emergence of digital investment has encouraged direct investment. Anyone can invest online by offering schemes such as fund house websites.

Regular Mutual Fund Scheme: It is the most popular type of mutual fund investment in which investors can contribute to investing in their own behalf through brokers and fund managers. Thus investors have to pay a fee to their fund house, but they can be assured of the fact that their money is in the hands of experienced professionals. It is a good option for beginners and regular investors who are not financially competent and lack time to do the investment-related tasks properly.

Growth Plan: It is a strategy or version of an ELSS scheme in which investors leave the investment for a specified period and do not earn returns or dividends without investing. The benefits from the growth plan accumulated over time and by redeeming the units at higher NAVs, buyers earn income relative to the NAV at which the units are purchased.

Dividend Option: Shareholders receive regular dividends from their investment in the ELSS scheme under this option. While all dividends are tax-free for shareholders, ELSS dividends are subject to a 10 percent DDT (dividend distribution).

Note: Investors choose to invest through the Systematic Investment Plan (SIP) and the lump sum investment. Investors should try to stay invested for high returns for at least 5 to 7 years because short-term equity investments are unpredictable but appear to average long-term. ELSS investments have a lock-in period of 3 years that can be extended by the shareholder to any period of preference, that is, no block-based extension is required. In the long run, ELSS Tax Saver Fund investments showed astounding returns compared to almost all asset classes. It is possible to receive ELSS in both open-ended and close-ended formats.

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