How to Invest in ELSS Tax Saving Mutual Funds Online

Equity-Linked Savings Scheme (ELSS) are a great way to save tax and get higher returns when compared to other types of tax-saving investment instruments. ELSS mutual funds are the go-to investment choice for a lot of people due to their potential for high returns and the advantage of tax benefits. The article presents a comprehensive and step-by-step guide on how to invest in ELSS online.

Equity-Linked Savings Scheme is a type of tax-saving mutual fund offering tax exemption of up to INR 150,000 from the annual taxable income that comes under Section 80C of the Income Tax Act, 1961.ELSS fund is an equity-oriented plan with a set lock-in period of three years. By investing in the ELSS mutual fund, an investor can save up to INR 47,000.Also Read: ELSS Withdrawal: Can ELSS Be Redeemed Before 3 Years?

A few important features of ELSS mutual funds have been listed below:

• At least 80% of the total investable collection is invested in equity and its related instruments.
• The fund invested in equity is in a diversified manner starting from themes, market capitalisation and sectors.
• There is a lock-in period of about three years but no maximum investment tenure.
• There is a feature of tax exemption under Section 80C of the Income Tax Act on the invested amount.
• Income is treated as LTCG (long-term capital gains) and it is taxed as per the prevalent tax rules.

The ELSS mutual funds have a reputation for providing dedicated tax deductions of up to INR 1,50,000 yearly under Section 80C of the Income Tax Act of 1961. With this policy feature, an investor can save up to INR 46,800 yearly in taxes.Also Read: Know The Risks Associated With ELSS Mutual Funds Investment

The thought of investing in ELSS mutual funds can be daunting to many. It is a pretty simple and straight-forward process which can be achieved by following the steps mentioned below:

• Step 1: Select Tax-Saving Scheme The scheme is based on the return offered. Sometimes just looking at figures, one cannot point out the best mutual fund. But in all probability, it has been seen that the highest-performing mutual fund the year before becomes the best-performing mutual fund in the current year as well.
• Step 2: Make the Choice between Regular or Tax-Saving Mutual Fund The ELSS mutual fund has two plans- regular and tax saving. Regular funds charge more or less a higher expense ratio yearly due to payment to the mutual fund distributor. The flip side is that direct plans don’t need to pay distributors. Due to the major differences of plans, they will end up having different NAV’s.
• Step 3: Open a Bank Account The dividends will be credited to the bank account operating under the investor’s name.
• Step 4: Pick the Intermediary There are many mutual fund distributors in the country. Although you can directly approach the company, you are still advised to select your intermediary who can step in and manage everything on your behalf. One big advantage is that you do not have to pay their commission. The company that they deal with provides them their share when they get a client.
• Step 5: Mutual Fund Distributor There are people who take up the profession of being a mutual fund distributor. A mutual fund distributor invests on the investor’s behalf after considering which fund will provide the most benefits.
• Step 6: Online Distributor One can pick the online distributor instead of the person you met in person.

Also Read: How To Select The Best ELSS Mutual Funds To Maximize Your Returns?

There are three main reasons why you should invest in ELSS funds:

• Low Minimum Amount Many ELSS plans enable investors to begin their investment with as low an amount as INR 500. This means that an investor can embark on their investment journey without having to necessarily accumulate a huge investable amount.
• Diversification ELSS funds invest in a wide range of companies that range from small-cap to large-cap and across many sectors. This gives the investor an opportunity to diversify their investment portfolio.
• SIPs When investing in a lump sum amount in the ELSS scheme, investors prefer the Systematic Investment Plan method because it creates a consistent habit of investing in small amounts while availing of tax benefits along the way. This gives an opportunity to grow wealth.

Also Read: 10 Things You Need to Know Before Investing in ELSS

Before one invests in ELSS funds in India, there are a number of conditions that one needs to consider thoroughly:

• Investment + Tax Planning ELSS funds offer both tax and investment benefits. Prior to investing, the investor should ensure to create an investment plan which includes tax planning to maximise financial goals.
• Recommended Investment Horizon Although ELSS funds have a lock-in period of three years, they are ideally suited for long-term financial goals because of their inherent volatility of equity investments. Maintaining an investment period of 5-7 years is best for ELSS.
• SIP or Lump Sum Investors opt for ELSS funds in order to save taxes. This sometimes compels them to make a lump sum amount of investment. ELSS investment plans are linked with long-term financial goals so starting a systematic investment plan (SIP) helps to leverage the buying cost per unit and avoid market timing issues.

Also Read: Is ELSS a Safe Option for You?

ELSS mutual funds present a good mix of high returns along with tax benefits. ‘’How to invest in ELSS online’’ is a crucial component that investors need to address. This is because they carry with them informed decisions, and market risks but long-term commitment could create wealth. By evaluating your risk appetite, understanding investment strategy and with diligent planning, you can make the most of ELSS.