Invest in ELSS Mutual Funds to Save a Big Amount on Your Taxes! by Dishika BahetiWe always get massively confused in taking a decision that whether we should invest in for the purpose of generating returns, or we should focus on saving taxes, and crave for an alternative that could provide both these benefits. Thankfully, there is one such alternative that could provide us with benefits of both the worlds good returns and a generous amount of tax-savings. Equity Linked Savings Scheme (ELSS) is one such uniquely advantageous tax saving scheme, where you get the benefit of rewarding rate of returns to be fetched in the future. Although there are many schemes that are solely launched to save taxes, ELSS can also be utilized for wealth generation since it invests profoundly in equities to ensure that the desired long-term yields are achieved. In this article, wed have a detailed discussion as to what makes ELSS a rewarding choice for investors.Salient Features of ELSS Funds Attractive Returns on Investment:As investments under the ELSS Funds are made in the equity markets, there is a scope for higher returns as against many other tax-saving investment options from the viewpoint of a long-term period. Thus, in addition to savings on taxes, these schemes manage to pull in hefty profits on your capital employed. However, it is always recommended that you should plan to invest in an ELSS fund over medium to long-term period, so as to draw supreme benefits. While Fixed Deposits and Provident Funds provide returns only to the tune of 8%, ELSS schemes hold a remarkable track record of generating returns that have soared up to 12% or even higher, over the past decade. Lowest Lock-In Period:ELSS Mutual Funds have the minimum lock-in period when compared to other tax-saving investment choices. In comparison to a lock-in period of 5 years and 7 years in Fixed Deposits and Public Provident Funds, respectively, ELSS Funds have a lock-in period of merely 3 years. Thus, investors opting for ELSS against FDs will be able to secure higher liquidity and will be able to plough back their money much sooner. Tax Benefits on Gains Earned:One of the most compelling features of the ELSS Funds is that the returns which are yielded on the investments are 100% tax-free. Once you stay invested in these funds for the minimum designated lock-in period of 3 years, the long-term capital gains arising will remain intact and the taxman will not be able to touch a penny. Thus, by investing in these schemes, the depositors can fully cherish the entire amount received either on redemption or maturity. Flexibility in Investing: Even though the lock in period is somewhat lengthy considering 3 years straight, investors however, can stay invested in these schemes with or without any further addition for as long as they desire. They also have the option to stop an ELSS SIP at any point, but the amount already invested can be withdrawn only after the completion of 3 years. Since ELSS is a well-diversified scheme, it is suggested that it shall be taken into consideration for a long-term investment period. Lesser Influence of Market Fluctuation:Over a good number of years, ELSS Mutual Funds have proven to be fairly less volatile in comparison to other equity investment options. Thus, many market gurus recommend that the investors should choose to invest in ELSS Schemes, so as to protect themselves from the volatility of the conventional stock market options. Thus, being an investor, if you are desirous to kill two birds with a single stone reap high returns together with saving a good amount of tax then the ELSS schemes are the finest choice for you, where you get the chance to draw maximum benefits if you invest systematically. Lumpsum investment at the end of the financial year will only help you to reduce your tax, but your funds might not be capable of generating the same amount of return. Hence, you could miss the potential returns by ignoring the effect of time value of money.The author is a financial writer who writes various contents on different aspects of the financial world and gives advice on various mutual funds like ELSS Tax saving mutual funds, large cap funds, small cap funds. Currently, shes under employment with MySIPonline and provides online investment services on Pan-India level.Article Source: eArticlesOnline.com