Advantages of an ELSS Scheme | Fusion - WeRIndia

Advantages of an ELSS Scheme

Advantages of an ELSS Scheme

Equity Linked Saving Scheme (ELSS) is one of the best schemes for investors to yield good returns while saving tax.

This scheme provides an opportunity to gain while saving. Normal saving can yield about 8 per cent of returns while investing in equity fetches your more returns in the stock market if the conditions are favorable. If you have a good portfolio of equity stocks, it will fetch higher returns.

The ELSS scheme has many advantages.

Here is a list of some of the benefits:

Shorter lock-in period:

The ELSS scheme has a shorter lock-in period compared to other schemes like ULIPs. The minimum duration of the lock-in period for ELSS is 3 years.

Higher returns:

The scheme provides higher returns compared to other tax-saving options like Public Provident Fund (PPF), Fixed Deposits (FDs) etc. However, note that the risk is also higher for investment in equities.

Tax benefits:

The scheme offers a tax-saving benefit. Investment of up to ₹1.5 lakh is eligible for deduction from your taxable income. However, you should keep the investment for a lock-in period of 3 years in the scheme. The long term capital gains are also exempt to the extent of ₹1 lakh.

Long-term value growth:

Even though the lock-in period is 3 years, you can keep your investment for more than 3 years to gain long-term. Long-term investments yield higher returns. At the same time, the risks are also higher.

Promotes saving habit:

You can invest in the scheme systematically. Hence, it promotes saving habit. You can invest in the scheme with an amount as low as ₹500. Your savings grow gradually over the years. The continuous investment in the scheme inculcates saving habit. You will get returns for your SIP amounts every month after 3 years. This encourages you to save further.

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