Long term investments for long term investors offering the benefit of wealth building with tax exemption.
ELSS is designed for long term investment with a lock-in period of three years. This scheme is designed specifically for long term investors who can avail tax exemption under Section 80C. The investment philosophy helps investors build wealth over a long term with tax benefits.
The objective of ELSS is to generate long term capital growth from a diversified portfolio of equity and equity related instruments with tax benefits to the investor.
Benefits of the Scheme
Tax Deduction Under Section 80C
Under section 80C of the Income Tax Act 1961, an individual/Hindu Undivided Family (HUF) is entitled to a deduction from gross total income up to Rs.1 Lakh (along with other prescribed investments) for amounts invested in ELSS.
Long Term Investment
One of the tenets of successful equity investment is the ability to understand that companies grow over a long period of time. However, all companies face tough times, squeezed margins, lower profits, and crisis thus pressurizing fund managers to sell stocks which have sound fundamentals within a short period. The three year lock-in period in these schemes provides fund managers the flexibility to choose and buy sound fundamental stocks having long-term growth and remain invested.
Low Portfolio Turnover Ratio
Short-term pressures such as frequent redemptions force fund managers to sell their holdings. Every time a fund manager sells or buys some shares, the fund incurs costs such as payments to brokers and transaction charges. The three year lock-in period provides relief to fund managers from redemption pressures and helps them keep a low portfolio turnover ratio.
Systematically Save Tax
This scheme helps investors invest a small amount regularly every month through Systematic Investment Plan (SIP) to meet their tax-planning objectives and reap the benefits of rupee cost averaging.