An equity-linked savings scheme (ELSS) is an open-ended equity Mutual fund offering tax benefits up to ₹1,50,000, under Section 80C of the Income Tax Act, 1961. By investing in ELSS, you can save some amount every year in taxes and promote the habit of long-term investment and saving. You can invest in ELSS as an SIP or a lumpsum. In the case of SIP, each instalment will have a lock-in of 3 years. Investors can withdraw their money any time after the three-year period has elapsed. They also have the option of continuing to invest in the fund.
Tax implications of investing in ELSS:
Under section 80C of the Income Tax Act, investments in ELSS funds are eligible for a tax exemption of up to ₹1,50,000. As ELSS funds are open-ended equity funds, they are taxed in the same way as equity funds. There are no short-term financial gains with ELSS because they have a three-year lock-in period. They are, however, liable to a 10% long-term capital gains tax on gains exceeding ₹1,00,000.
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