If you want to participate in the thrill of the stock markets, but are not gutsy enough to do it on your own, try this mutual fund scheme. Investments in the ELSS will give you a taste of what bulls and bears are all about. It will also give you a tax rebate of 20 percent.
The Equity Linked Savings Schemes (ELSS) give their investors the option of saving tax while participating in the growth of the capital market.
An investment of up to Rs.10,000 under ELSS qualifies under Section 88 of the Income Tax Act, 1961. Other tax advantages offered include inflation indexing of any capital gains, tax liability and lower tax rates on redemption of units.
As per the ELSS guidelines issued by the Central government, mutual funds have to ensure that at least 80 percent of the funds are invested in equities and equity-related instruments. Investors can sell back their units to the mutual fund at the NAV-based repurchase price after the lock-in-period of three years.
The value of your investment will depend on how the markets have behaved over a period of time and the ability of the mutual fund to maximise returns.
ELSS is ideal for:
i) Small investors as it is a simple way of investing in the stock market.
ii) Investors who may not have a lump sum to invest in order to save tax. Open-ended ELSS allows them to invest at various points depending on the availability of funds, as well as take advantage of cost averaging.
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