Here’s why many people might opt for ELSS schemes in 2020

ELSS (Equity Linked Saving Scheme) is a tax saving scheme, which is getting quite popular in the country as it helps the investors in saving a good amount on taxes. For instance, if you are investing Rs 1.5 lakh, which is the maximum amount permitted for tax deduction under Section 80C of Income Tax Act, then you can save Rs 46,350 amount of tax. ELSS meaning can be said as a tax saving investment scheme where one needs to hold the investment for at least three years. If you want to find out the difference between ELSS and other funds then consider reading this article:

Nowadays, many people are selecting ELSS schemes over other investment schemes. Here are a few reasons why people might opt for ELSS schemes in 2020:

  • Possibility of high returns: If you are planning to choose any scheme under the ELSS category then you will be able to enjoy a remarkably higher return when compared to other tax-saving schemes available in the financial market. Even if returns are always linked to the market and are not fixed. But there are still good chances to get better returns when considered the previous records in the past five years. If you are looking for a better return on your investment then you have to hold it for at least or more than five years. However, you should always consent an advisor or a certified financial planner before investing in such schemes.
  • Capital appreciations: If an investor is having a long term financial goal then he can link his ELSS fund to it, in order to generate wealth and fulfil the goals. If you are choosing the growth option then you can generate the desired corpus and gain from compounding as well.
  • Enjoy tax-free maturity proceeds: Nowadays, the majority of the tax-saving funds tends to make a redemption at the time of attracting TDS (Tax Deducted at Source). Having said that, if you are planning to invest your money through ELSS scheme then you will not have to pay a single penny of return tax if you are withdrawing your investment after the completion of the 3-year lock-in cycle. In addition to that, you will also get the option to redeem your money via the exchange after a year in the secondary market.
  • SIP option: If you are not capable of investing a lump sum amount in one go then ELSS provides you with an option of SIP, where you can select monthly investment mode. It will help in removing any sort of burden of giving away a huge amount of investment in a single month. However, the minimum amount that you have to invest in this mode is Rs 5,000 per year.
  • Least lock-in period: If you are planning to invest in ELSS then you should be aware of the fact that it has the least lock-in period. If you compare this with other tax-saving instruments, they would ask you to hold your investment for 15 years but that is not the case with ELSS. You only need to hold your investment for a lock-in period of three years.
  • Categorised availability of funds: There are various categories of schemes designed by AMC (asset management company) so that people can invest according to their capacity for taking risks. One can choose from large-cap, mid-cap and small-cap. Moreover, the returns and amount of risk vary in each one of them.

ELSS is an amazing investing scheme where one can save a lot of tax and also get good returns. Some of the factors mentioned are the reasons why people should opt for ELSS scheme in the year 2020.

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