How is ELSS different from mutual funds?
July 22, 2024 ⚊ 1 Min read ⚊ Views 30 ⚊ FINANCE
ELSS (Equity Linked Savings Scheme) stands apart from traditional mutual funds primarily due to its tax-saving benefits and investment strategy. These funds mainly focus on equity and equity-related instruments. The critical advantage of ELSS lies in its tax-saving provision under Section 80C of the Income Tax Act, enabling investors to avail deductions of up to ₹1.5 lakh per year.
Unlike regular mutual funds, ELSS funds have a three-year lock-in period, the shortest among tax-saving instruments under Section 80C, promoting long-term wealth creation while offering tax benefits. They also provide the potential for higher returns compared to traditional tax-saving options like PPF or NSC, owing to their equity exposure. However, this also entails higher market risk, as their performance is linked to stock market fluctuations..
