A mutual fund is an investment programme that is funded to the shareholders who trade in diversified holdings and are personally managed. Mutual funds are seen as an ideal investment for investors who do not know much about investment. Investors can choose investment goals depending on their profits and financial goals. The investments can be made in securities like stocks, bonds, money marketing instruments, and other assets.
What is ELSS fund?
The Equity Linked Savings Scheme or ELSS funds are a type of mutual funds that are based on their returns from the equity market. The funds are tax saving in nature and are also eligible for the tax deduction of up to Rs. 1.5 lakh under the Income Tax Act, Section 80C. The ELSS funds help in tax saving under the Section 80C, Section 80 CCC and Section 80 CCD.
An ELSS scheme is the category of the mutual funds that are promoted by the government of Indian in order to encourage the long-term investments in equity. Under the ELSS scheme, majorly the funds are corpus and they are invested in equities or equity-related products.
What are the types of ELSS funds?
The ELSS mutual funds are of two categories
- Dividend
- Growth
The dividend funds are further divided into;
- Dividend payout and
- Dividend Reinvestment.
If the investor opts for the dividend payout option then they receive the dividend which is tax-free but under the option of dividend reinvestment, the dividend is reinvested as a fresh investment has to buy more shares.
Under the option to grow, the investor can look for the long-term wealth creation. It works like a cumulative option for full value in realization on the redemption of the funds.
How to invest in ELSS?
If you are wondering as to how to invest in ELSS then it can be done in two ways again;
- The first can be a lump sum and
- The second through SIP (Systematic Investment Plan)
The SIP or Systematic Investment Plan is the process where an investor needs to invest a fixed amount of sum monthly on the specific date. The SIP inculcates a disciplined approach towards the investing of the investor. The SIP also gives the benefits of rupee cost averaging to the investor.
What is the lock-in period in ELSS?
The ELSS funds have lock-in periods for the time of three years. When compared to the EPF (Employees Provident Fund), PPF (Public Provident Fund), NSC (National Savings Certificate) and other common investments under the Section 80C. When compared to all, the ELSS has the shortest period of lock-in.
What is the benefit of tax in ELSS?
The primary purpose of any investment is to gain deductions under the income tax for wealth creations. This is just another way to save some of your money and make it look legal. The ELSS funds fit this concept perfectly if the investor gets just a double edge benefit on the tax and the wealth creation at the same time. Dividends earned under the ELSS funds are also exempt from all the taxes. ELSS funds also offer benefits for the long-term gains of capital and they have a lock-in period of three years. This means you have invested in the investment for three years and you are locked-in to this investment.
What is the investment limit of ELSS funds?
There is a certain limit to invest in the ELSS mutual funds. A person can start the investment in ELSS with the minimum sum of Rs. 500 and go on till they wish to. An ELSS fund comes with no upper limit of investment. But you can save up to only Rs. 1.5 lakh per year while investing in ELSS funds.
What are the risks involved in ELSS funds?
The ELSS mutual fund has no covered or guarantee over the returns. As they generate the earnings from investments in the equity market. Nonetheless, the best performing ELSS mutual funds also have given the best and consistent inflation beat that has returned in the long run. The same quality is not possessed by other PPF (Public Provident Fund) or FD (Fixed Deposits). Hence, ELSS mutual funds can be considered as a good investment to save up on some income tax.
The primary objective of Reliance tax saver ELSS funds
The primary objective of this scheme is to create a long-term capital for appreciation form the portfolio that is predominantly invested in equity related to the instruments and in equity. Somehow, there can be no assurance given to the same scheme of investment that the objective can be achieved.
Fund (G) Reliance Tax Saver (ELSS)
| Fund Name | : | Reliance Mutual Fund |
| Scheme Name | : | Reliance Tax Saver (ELSS) Fund – (G) |
| AMC | : | Reliance Mutual Fund |
| Type | : | Open |
| Category | : | Equity – Tax Planning |
| Launch Date | : | 25-Jul-05 |
| Fund Manager | : | Ashwani Kumar |
| Net Assets (Rs. cr) | : | 10082.69 |
Reliance Tax Saver (ELSS) Fund – (G) – NAV Details
| NAV Date | : | 06-Sep-18 |
| NAV [Rs.] | : | 58.17 |
| Buy/Resale Price [Rs.] | : | 0 |
| Sell/Repurchase Price [Rs.] | : | 0 |
| Entry Load % | : | NIL |
| Exit Load % | : | Nil |
The above-listed details help you understand more about the Reliance ELSS funds. The ELSS funds can be exited only after completing the lock-in period and not before that. If the ELSS mutual funds lock-in is completed then you can surely try and invest in Reliance ELSS funds. It is compulsory and mandatory to complete the lock-in period before exiting the ELSS fund.
Conclusion
The ELSS mutual funds have become a popular tax saving investment amongst the investors under Section 80C. The ELSS mutual fund is also perfect for planning retirement and the wealth creation with the advantage of the lower lock-in period, rupee cost averaging risk, SIP method of investment, and also no tax on dividends or the benefits of capital gains. The ELSS funds must be considered by every investor if planning for the investment goals.