What is elss fund or equity linked savings scheme?| tax saving schemes|

Q: What is ELSS fund (Equity linked savings scheme)?

Ans: ELSS fund investment is a diversified equity mutual fund in which the maximum percentage of the investors money is invested in equity. It is a part of longtime equity portfolio since the fund comes with a lock-in period of three years. ELSS comes under the section 80C in which the ELSS funds returns, up to the amount of 1.5 lakhs is not taxable.

    ELSS comes in both growth and dividend investment funds. Growth fund means the company doesn't pay dividends to the investors but instead reinvests the dividend in the market and the dividend investment fund is vice versa. There are other types of investments preferred by people who invest in , PPF (People Provident Fund), FD (Fixed Deposit), NCS (National Savings Certificate). In such funds, ELSS and PPF returns are not taxable while FDs and NCS returns are taxable.

  If we compare the returns of ELSS with PPF, FDs, NCS:

• ELSS gives a return of 12-14%.
• PPF and FDs give a return up to 7.5%.
• NCS gives a return up to 8% and for senior citizens, it goes up to 8.5%. 

Types of funds in ELSS:

ELSS consists of different funds like large-cap funds, mid-cap funds, etc. Though it enjoys the benefits of section 80C up to a certain limit, it is a risky scheme under some circumstances:

• If the market is not performing well you can't withdraw the money because of the lock-in period. (Though I think it's a trade-in you give for the unwanted withdrawal of the funds due panicking).
• If other schemes are performing well under particular conditions, you will not be able to change the scheme because of the lock-in period.

     Let's see the lock-in period of the above-mentioned schemes:

• ELSS has a lock-in period of three years.
• PPF has a lock-in period of fifteen years.
• FDs (tax saving FDs) have a lock-in period of five years.
• NCS has a lock-in period of five years minimum.

   ** If your main objective is tax saving then elss is one of the best options under section 80C.

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