Dhaval Kapadia, Director, Portfolio Specialist, Morningstar Investment Adviser (India) answers queries in The Financial Express, from where the below has been taken.
Is it advisable to invest in ELSS with a lump sum amount for tax saving?
- Arvind Gaikwad
Equity Linked Savings Schemes, or ELSS, are equity diversified funds that offer a benefit under Section 80C of the Income Tax Act. Being a diversified equity fund, investments can be made in lump sum or via a systematic investment plan (SIP).
Tax benefits would be available only in the financial year in which the investment is made and only for the amount invested. Since ELSS investments are locked-in for three years, each SIP gets locked in for a 3-year period starting from the date of that respective SIP. Therefore, have a minimum investment horizon of 3 years for investments in ELSS funds.
Besides tax planning, the other important considerations about investing in ELSS are your risk appetite and investment horizon. ELSS funds invest in equities, which tend to generate attractive returns over the longer term (3 to 5 years and above) but these returns can fluctuate over the short term.