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5 Interesting Facts About ELSS

Author: Team Finapolis/Monday, December 1, 2014/Categories: Mutual Funds

5 Interesting Facts About ELSS

ELSS or the Equity Linked Savings Schemes are back in the limelight after the union Budget 2014-15 raised the limit of deduction under section 80C from the existing Rs 1 lakh to Rs 1.50 lakh. This is an important move which can help save tax on the additional Rs 50,000 compared to the previous financial year.

Here’re the 5 reasons to go for ELSS not only to save tax but also to build on the investment capital.

(1)     ELSS have a lock-in of three years which is lower than any other tax saving instrument available coupled with the potential to generate higher returns makes it important and also an attractive investment option.

(2)     Even if the investment in ELSS is for the purpose of saving tax, it still is an investment and equal importance has to be given to the kind of exposure one takes at least at the time of investment as ELSS schemes’ portfolio allocations might change subsequently depending on the perceived changes in the market trends.

(3)     More than 75% of the ELSS schemes have more than 80% of their portfolio in the large caps. Only 31% schemes have more than 10% exposure into mid caps.

(4)     As the ELSS is a lock-in product, the only option where you as an investor have the chance of getting the part of the profits before the lock-in period ends is the dividend option.

(5)     If you’re looking for dividend option, have a look at the dividend history. It gives a clear picture of how the schemes have paid dividends over a period of time. As the general market condition over a period of time is constant for all schemes, this gives quite a clear study on the willingness of the schemes to pay dividends.

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