How to Invest in ELSS Mutual Funds
When you look for an investment opportunity, you have certain criteria in mind—it should help you build wealth, have flexible investment options, and meet your financial goals. What if we told you there’s an investment vehicle that helps you do all this and save tax as well? Through Equity-Linked Savings Scheme (ELSS), you get all these benefits. In this article, we will understand what ELSS is, its features, and how to invest in ELSS.
What is ELSS?
Equity-Linked Savings Scheme or ELSS is a tax-efficient mutual fund that gives you inflation-beating returns while simultaneously giving you a tax deduction of up to Rs 1,50,000 under Section 80C of the Income Tax Act.
When you invest in ELSS, you invest in equity-oriented mutual funds, which help you make market-linked returns. These special mutual funds also help you save on taxes. They have a lock-in period of three years.
You can invest in ELSS in a lump sum or through Systematic Investment Plans (SIPs).
Features of ELSS
Before understanding how to invest in ELSS mutual funds, let’s look at the features of ELSS.
- ELSS is an equity-oriented mutual fund which must invest at least 80% of the total funds in equities.
- They are open-ended mutual fund schemes.
- You can choose between a growth option or a dividend option when investing in ELSS.
- They are eligible for tax deductions. You can claim as much as Rs 1,50,000 every year under Section 80C of the Income Tax Act. However, you can still choose to invest a higher amount in an ELSS fund without the tax benefit.
- They have a lock-in period of three years, the shortest among other tax-saving instruments.
- It is not compulsory that you have to redeem your investment after three years.
- You can invest through a lumpsum mode or SIP mode in ELSS. When you choose SIP, each instalment has a lock-in period of three years.
- Returns on ELSS are market-linked.
How to Invest in ELSS?
Investing in ELSS is similar to the process of investing in mutual funds. If you know the steps to invest in mutual funds, you can easily understand how to invest in ELSS online or offline.
How to Invest in ELSS Mutual Funds Offline
The offline method is the traditional way to invest in ELSS or mutual funds. You can contact a mutual fund distributor, who will give you a form to fill in and provide guidance on investing in ELSS. The distributor will collect additional information and documents, such as investment cheques and deposit them in the mutual fund company office.
If you do not want to approach a mutual fund distributor, you can also download the form from the AMC website, fill in the form, and submit it to the AMC office.
How to Invest in ELSS Online?
To invest in ELSS online, there are three options available to you:
- You can go to the AMC website and invest
- You can log in to the Registrar and Share Transfer Agent (RTA) website
- You can choose to invest through other online portals
To invest in ELSS online, you have to be KYC compliant. You can register on any of the modes mentioned above, provide details such as your phone number, email ID, PAN, bank details, etc. and complete your KYC. Once you are KYC compliant, you can select the scheme and pay the amount you wish to invest. The process is completed once the transaction is verified. Please save the receipt as proof for when you file your taxes.
Note that ELSS investments can help you save taxes. Hence, they are subject to a lock-in period. You cannot withdraw ELSS investments before three years.
Investing in ELSS has the dual benefit of saving tax and building wealth in the long run. This article outlines the offline and online methods of investing in these mutual funds. Before investing in ELSS, make sure to do your research on the fund.
Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.