How to Invest in Equity Linked Savings Scheme (ELSS) to Save Income Tax?

There are many investment avenues for investors to choose to park their funds in today's financial markets. One such scheme which offers tax benefits up to Rs 1,50,000 per annum under Section 80C of the Income Tax Act is the Equity Linked Savings Scheme or ELSS.

These ELSS funds are open-ended equity funds and make it possible for investors to save a huge amount on the payment of tax. The lock-in period for ELSS is three years. The funds from ELSS and subsequent returns are subject to market risks throughout the year.

The investment made in the ELSS, linked to equity will be subject to Long Term Capital Gains tax rules. It has the potential to provide higher returns compared to other forms of investment if the market performs better. If in case, an investor has a good portfolio then there are better chances that they can stand to earn maximum return on their investment.

Let us understand in detail as to How to Invest in Equity Linked Savings Scheme to Save Income Tax?

Investment Form

Investment in ELSS can be either made directly or via a mutual fund advisor or distributor. The application form for the same can be obtained from the distributor or AMC or download the form from the mutual fund web portal.

Know Your Customer

The Know Your Customer or KYC is an essential requirement for investing in mutual funds. The KYC involves the submission of address proof, identification proof, Aadhaar card, an in-person verification process has to be done before investing.

Modes of Investment

An investor can opt to either deposit in lumpsum or can opt for a Systematic Investment Plan (SIP) for investing in ELSS. In case of SIP, a specified amount will be debited from the investor's bank account and the same will be invested in the scheme.

Investment Amount

There is no maximum limit for investing in ELSS. However, an individual can invest a minimum of Rs 500 to start-with. The maximum cap available for tax deduction under Section 80C per annum for investing in ELSS is Rs 1,50,000 or the actual total amount invested during a financial year (whichever is lower).

Account Statement

Post completion of the investment, a statement of account will be sent by the Asset Management Company (AMC). One has to maintain the record of investment made in ELSS for tax purpose.

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