Outlook Money
ELSS is an equity-oriented scheme as the investments here are directed to equities or equity-related instruments.
One of the major distinguishing features of ELSS is the mandatory lock-in period of three years, which means that investors cannot withdraw the amount invested before the mandatory lock-in period is over.
Some key highlights of ELSS include its tax benefits, equity orientation, flexible tenure and diversified portfolios.
These funds involve creating diversified portfolios of stock from multiple industry bases and market sizes. The fund managers research to determine the proper stocks to balance the risk and return, keeping in mind the long-term creation of wealth.
Major reasons why one should invest in ELSS funds include its low entry fees, long-term growth and Systematic Investments Plans.
ELSS funds are subject to LTCG tax. Profits exceeding Rs 1.25 lakh in a financial year are taxed at 12.5 per cent. It is important to note that this applies to earnings generated after the lock-in period. Therefore, short-term capital gains cannot be earned on ELSS investments.