Equity Linked Savings Scheme

Some of the features offered by the ELSS are mentioned below.

• The investment by ELSS funds is done majorly in the equity market and thereby comprises a majority of their portfolio.
• Such investments do not have the backing or guarantee of the Government.
• Such funds provide dual benefits to the investor in terms of tax savings and capital appreciation from its various investments.
• The scheme has a minimum tenure or a lock in period of 3 years. This is the shortest lock-in period among similar tax saving schemes.
• Investment for a longer period under ELSS enables the investor to get tax exemption on the returns earned.
• Investment in ELSS comes with an option to receive regular dividends via dividend payouts or capital appreciation via its growth option.
• The returns that can be generated by a good and efficient ELSS can range anywhere between 10-12% and is therefore, highest among the other investment options available for the potential investors.
• Another important feature of the scheme is that it does not have any entry or exit load.
• The minimum investment that can be done under ELSS is Rs. 500.
• The maximum investment that can be made under ELSS is Rs. 1,50,000 per annum.
• The investment under ELSS can be made in a lump sum amount or through Systematic Investment Plan (SIP).
• In case the investment under ELSS is done via SIP, the investment made in 1st year is redeemable after the 4th year. Similarly, the investment of the 2nd year is redeemable in the 5th year. The entire investment under ELSS is redeemable after the completion of 3 years from the date of the last investment under ELSS.

Process to Invest under ELSS

As mentioned above, the investment under ELSS can be done either via a lump sum amount or via SIP (Systematic Investment Plan), whichever best suits the investors needs and convenience.

• The investor has to first comply with the necessary KYC norms for investment in ELSS.
• In case the investor has already invested in mutual funds under any of the schemes, the KYC details of such investors are already available with the registration agencies and there is no further need to re-register them.
• An investor who is new to investment in mutual funds and has no prior registration record, can comply with the required KYC norms by registering with the KYC Registration Agencies or any Mutual Fund management Agencies that offer investment in mutual funds.
• An investor needs to provide his/her 
• Aadhaar number, 
• phone number linked to the Aadhaar account,
• an identity proof, 
• an address proof, 
• PAN number, 
• email address
• bank account details. 
• scanned copies of your photograph, identity proof, address proof, aadhaar card etc.

• Investment under ELSS can be done post completion of the eKYC process, however, a person can invest a maximum of Rs. 50,000 per Mutual Fund after eKYC is completed without In-Person Verification (IPV).
• An investor can also do KYC registration offline through various other means like a SEBI registered investment advisor, at banks, Mutual Fund agency offices, etc. but such registration is not prompt or quick as it takes a few days before the details to be validated.

Best time to invest in ELSS

The main purpose of any investment has to be tax savings along with aiding the fulfillment of long term goals. Hence, it is always advisable for the investor to start investment as early as the start of a financial year. This helps the investor to make informed and carefully planned sound investment rather than rushed or rash investment done at the last minute just in an effort to reduce their tax burden.

Investing through SIPs and in a planned manner helps the investor to avoid any lump sum outflows or higher outflows from his/her income every month. This further enables the investor to focus on other investment options available in the market.

The investor gets in the habit of a regular investment with a set or fixed outflow every month which can be altered any time depending up on the needs of the investor.

Comparison between ELSS and other Tax Saving Schemes

FAQs