In simple terms, the Equity Linked Saving Scheme is an open-ended Equity Mutual Fund that provides an individual with bets returns and great tax benefits. All the tax exemptions that are offered under this scheme are under Section 80C of the Income Tax Act. In ELSS, the lock-in period over these funds is three years. Also, the investor can opt out of the scheme by selling it after this period is completed. Notably, a large part of the capital is invested in the equity funds themselves.
It is very simple and easy to invest in an Equity Linked Savings Scheme, where an investor can invest a minimum amount of Rs. 500 in the scheme. Apart from this, the investors are also allowed to invest a lump sum amount at a go, or they can also invest on monthly basis in equity-oriented assets by way of Systematic Investment Plans.
For individuals who have just started their careers, the Equity Linked Savings Schemes is one of the best investment options for them. The ELSS carries a lower risk factor which makes it the perfect investment choice for those who are earning less or average salaries. Furthermore, the scheme is also a good option for those who want to save on taxes. Under the ELSS, individuals can start investing as soon as they start earning.
Apart from the ELSS, other tax-saving schemes are available in the market which offer investors with higher returns such as FD, PPF, NSC, and others. The ELSS stands out as compared to others because of its higher returns since the returns offered by other schemes are generally restricted. Another factor is the lock-in period which is just three years, which attracts most investors and makes this scheme one of the best tax-saving instrument.
If you are having a sum of 2 lakh rupees you want to invest in the ELSS funds with a rate of return of 15% for five years. When your investment tenure will end, your maturity amount will be around Rs. 4,02,271.
Also, if you have started a SIP of Rs. 5,000 for five years with an expected rate of return of 15%, you could get Rs. 4,42,873 at the end of the tenure. Notably, the future value of the amount invested can vary depending on various factors & the results provided by this formula is an estimates rather than a guarantee.