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Simply Save | How should you select ELSS mutual fund for tax-saving?

Moneycontrol’s Jash Kriplani interacts with Rushabh Desai, founder of Rupee with Rushabh Investment Services

January 13, 2022 / 10:30 AM IST

It is almost end of the financial year 2021-2022, with just three months left before investors can take investment decisions to finalise their tax-saving plans for the financial year. 

Equity linked saving schemes (ELSS) are among the instruments that are eligible for tax deduction under section 80c. This is an important section as one can claim upto Rs 1.5 lakh deduction under this section.   

While there are several other options under 80c such as Public Provident Fund (PPF), National Saving Certification (NSC), bank tax-saving deposits and life insurance, ELSS has also grown into a popular instrument. 

The mutual fund industry also wants Ministry of Finance to allow a debt-linked saving scheme (DLSS), so that mutual funds can come up with similar products on the debt side as well. But for now, it is only the ELSS funds where mutual funds offer tax-saving feature to investors. 

As an equity mutual fund scheme, ELSS can not only help individuals to bring down their tax liability, but also create wealth over the longer term. Of course, it would finally depend upon the scheme’s performance and the overall performance of equity markets during your holding period. 

ELSS funds come with three-year lock-in period. After the lock-in period is over, investors can fully or partially withdraw their investments or even stay invested if they wish to. 

Remember, any capital gains from your ELSS investments will still be liable for long-term capital gains of 10 percent, if the gains are more than Rs 1 lakh. You get tax relief in ELSS as you can claim deduction for the investments that you make in such funds during the financial year. 

As it is an equity-linked product, ELSS can go through periods of sharp volatility and investment returns can see sharp fluctuations. 

So, how should you go about selecting an ELSS fund that suits your risk-profile, as well as return expectations, and what should you do if the scheme returns turn out to be below-par even par after a three-year lock-in? 

In today’s episode of Simply Save Podcast, Moneycontrol’s Jash Kriplani talks with Rushabh Desai, founder of Rupee with Rushabh Investment Services, on what you should keep in mind when investing in an ELSS fund.
Jash Kriplani is a journalist with over ten years of experience. Based in Mumbai. Covering mutual funds, personal finance. His last stint was with Business Standard, where he covered mutual funds and other developments in the financial markets