Equity Linked Saving Scheme (ELSS) is an open ended Mutual Fund Scheme and allocation of fund is largely made into equities and some portion in debt securities to make the investment more viable and reduce the risk. Since the investment is mostly in Equity Market one has to be careful with the investment.
You can read more about ELSS Mutual Funds in the link provided below:-
In this post I will discuss about the Reasons to Invest in the Scheme:-
Short Tenure Lock In Period: As compared to other Investment Schemes like Public Provident Fund and National Saving Certificate, ELSS has a relatively shorter lock in period of 3 years. Thus individuals who are looking for short term investment option can avail it. However if you want to continue for a longer period you can also do so.
Counter Inflation: The return on investments varies according to market sentiments and it ensures that you get a higher return on the investment which generally is more than prevailing inflation rates. Whereas, in NSC and PPF are fixed and may end up being lower than inflation.
Ease of Investment: You can chose and invest at your convenience. Investment can be as low as Rs 500 every month. Individual can also increase the amount as per his/her will. Monthly investment is considered a safer option compared to one time investment.
Tax Benefits: Tax Benefits under Section 80C is available on the Investment upto the extent of Rs1,50,000/- respectively. Hence you invest as well as reduce your tax liability at the same time. It has also been observed that over longer periods ELSS returns are higher as compared to conventional investment schemes but both enjoy the same tax benefits. Return on Investment is also tax free.
Professional Fund Management: ELSS funds are managed by Professional Fund Managers. Thus they try and make optimum use of the funds in order to ensure best possible return to the Investors.
But like every things in Life, ELSS investment also comes with a “Caveat”:-
Investment is Prone To Market Risk: Since the return is directly linked to market performance and economic scenario, Investment is more prone to risks and one needs to be careful and keep himself abreast with the scenario.