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Photo: File The maximum amount that can be invested in ELSS is ₹ 1.5 lakh.

Among the tax -saving investment scheme, equity linked saving scheme or ELSS helps the investor to reduce taxable income from the amount invested. This reduces his taxability. Understand this that ELSS not only provides an efficient way of saving tax, but also makes money over time. ELSS This is a savings scheme associated with equity. ELSS is a type of mutual fund, which invests in equity, like any other diverse equity mutual funds.

ELSS has a three-year lock-in period

The ELSS is different from the traditional mutual funds that it provides tax benefits on the amount invested and thus has a three-year lock-in period for the funds invested. Under Section 80C of the Income Tax Act 1961, the maximum amount can be invested in ELSS for tax objectives in one year is ₹ 1.5 lakh.

How to choose the right ELSS

  • Focus on funds that have performed better for a long time and have done better than benchmarks, they should be considered better than funds that have recently given great returns.
  • Investigate the portfolio of the schemes to ensure that the schemes you have chosen have diverse allocation for various fields and shares. This will give diversity in the plan and portfolio.
  • It is important to determine whether the plan is mid-cap or large-cap. According to Bajaj Capital, if you are ready to take moderate risk, then you should invest in large-cap tax-sewing funds. If you are ready to take more risk, then you should invest in mid-cap tax-saving funds. Some mutual funds adopt a more balanced approach. Keep in mind that sector-related portfolio allocation can change over time.
  • Connect your ELSS investment to a long -term target, such as children’s education, marriage, buying a house, or your own retirement needs, etc. After investing in ELSS and getting cash benefits in the year of investment, the period after its lock-in becomes equally important. ELSS investment is usually made for a period of three years. They cannot be withdrawn before a compulsory three -year period has passed.

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