What are ELSS Funds?
Equity Linked Savings Scheme (ELSS) funds are a category in the mutual fund product basket which allows the investors to reap multiple benefits of investing. ELSS Mutual Funds are best known for the tax benefits they provide under section 80C of the Income Tax Act 1961.
Further, the advantages of investing in an equity securities are also added to it. These are open- ended equity mutual fund with a statutory lock-in of 3 years and tax benefit. They are also known as tax-saving funds.
Why should you invest in ELSS funds?
Equity Linked Savings Scheme (ELSS) funds are a category in the mutual fund product basket which allows the investors to reap multiple
Here are five key reasons why one should invest in ELSS funds, which is also commonly referred to as tax saver mutual funds:
- 1. Tax Benefits :
ELSS is one of the available investment options under Section 80C of the Income Tax Act, which allows a tax benefit up to Rs. 1.50 lakhs in a financial year to the taxpayer. The amount of tax benefit is equal to the amount invested during the period, subject to the overall ceiling limit of Rs. 1.50 lakhs considered for all eligible payments/ investments taken together. One may invest in a lump sum or through SIP in ELSS funds to avail of the tax benefit.
- 2. Lock-in period :
Such mutual fund schemes are subject to a 3-year lock-in period. As such, one cannot redeem the investments in ELSS units before three years from the date of investment. If one is investing through SIP, such a lock-in period is calculated from the actual investment date for each instalment and not from the date of SIP registration.
- 3. Taxation :
Considering the 3-year lock-in period, the gains from ELSS funds will be classified as Long-Term Capital Gains (LTCG). As such, the gains from such funds are taxed at 10% (plus applicable cess and surcharge) without any indexation benefit. Since no benefit of indexation is allowed to the investors, one can directly deduct the redemption value from the cost of units redeemed to calculate the gains. Further, one can also avail an aggregate exemption of Rs. 1 lakh per year in respect of LTCG from equity shares and equity funds, including ELSS, taken together.
- 4. No Auto Redemption :
Unlike most of the eligible investments under Section 80C, the investments in ELSS units are not redeemed at the end of the lock-in period. As such, one can continue to stay invested in such funds, even beyond the 3-year lock-in period. This allows the investors to link such investments with their long term financial goals. As such, ELSS enables investors to club their tax savings and financial plans together.
- 5. Returns linked to Underlying Investments :
ELSS provides returns aligned to the investors as per the performance of the securities in the underlying portfolio.
- 1. Tax Benefits :
Features of ELSS
- a. ELSS funds invest 80% percent of their portfolio in equity.
- b. They have a statutory lock-in period of 3 years, which is the shortest amongst all tax saving instruments.
- c. Dual benefits of capital appreciation from investments in equity along with tax-saving
- d. ELSS Mutual Funds do not have any entry or exit load.
UTI LTEF is an Equity Linked Saving Scheme (ELSS) providing dual benefits of sound returns potential by investing in equity securities and also savings on taxes. The fund provides for portfolio diversification through its investment approach of investing across the market capitalization spectrum. UTI LTEF is suitable for investors looking for long term wealth creation by investing in predominantly in equity securities.
The asset allocation of UTI LTEF is as follows:
- Equity & Equity related instruments: Min 80% – Max 100% (Medium to high risk)
- Debt (including securitized debt): Min 0% – Max 20% (Low to medium risk)
With a distinct product positioning in terms of investment objective & asset allocation, provides you with the opportunity to meet various investment needs with one single offering which would help one to save tax beside wealth creation, insurance planning & retirement planning. So get in touch with a UTI Financial Advisor to know more
- Invested amount is the amount entered for either Monthly SIP and Lumpsum for the duration selected
- For lumpsum and monthly SIP investments returns are compounded annualized. 1 Year is assumed as 365 days.
- Dividends declared from benchmark's constituents isn't taken into account when comparing with investment in scheme's dividend plans.
- Worth of investment: Performance is compared against the latest benchmark of the scheme irrespective of the date of change of scheme's benchmark, if any.
- The start day for SIP investments is considered as 1st of every month
- For the purpose of NAV date applicability, if the investment date happens to be a non-business day, next business day's NAV is applied.
- Gold prices are available post 29 JAN, 2005 are based on daily closing values on MCX.
- PPF interest rate is assumed at 8.7% p.a. interest received is compounded monthly for the returns illustration in the charts.
- Dividend payouts reinvestment in scheme is not considered for the purpose of calculation of returns and graphical representation.
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