Equity Linked Savings Schemes are equity-oriented tax saving mutual funds that help you save tax under Section 80C of the IT Act while offering the growth potential of equities. Apart from these two benefits, they have a lower lock-in period of 3yrs which is the shortest lock-in period you can get in the category of tax saving products.
ELSS also offers few additional benefits by virtue of being an equity-oriented Mutual Fund. You can invest in ELSS through SIP or in lumpsum as it suits you. The SIP facility is beneficial for the salaried class as they may prefer to put aside a fixed amount every month for saving taxes rather than investing in lumpsum at the end of the year. They can continue with their SIPs year after year as they continue to remain employed.
While the lock-in period of 3yrs is essential, an investor has the option to continue his investment even after the lock-in period is over unlike in the case of other tax saving products where your money automatically matures or stops earning interest after the lock-in period is over. An investor can stay invested in the fund for as long as he/she wants and the longer the investor stays put, lower is his/her investment risk while chances of earning a higher return goes up with time.
