Equity linked saving schemes are mutual funds with a tax benefit.
ELSS are the mirror image of diversified equity funds.
That means the fund manager will invest in shares of various companies across various industries. Hence, it is a normal equity diversified fund.Since they invest most of their money in equities and equity related instruments, there is some amount of risk involved.
Other Notes:
- The dividends earned will be tax free.
- When you sell the units of these funds, you can avail of the long-term capital gain for which there is no tax.
- Lock in period of 3 years
- Investment possible through SIP(Systematic Investment Plan)
- ELSS commands better risk ratios as compared to open-ended equity schemes, with respect to the risk
- Comparison of ELSS with other tax saving schemes
(Click on image to see details)Source: rediff.com articles, way2wealth pdf
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