ELSS a tax-efficient investment option in recent times: Report

In ELSS, investors have the option of investing either through the SIP or by making lump sum investments. Experts say a low lock-in period, potential for capital appreciation, and tax advantages have made ELSS one of the preferred tax-saving investment options in recent times.

People primarily look for tax benefits with any investment, and ELSS is one of the most popular options in the mutual fund category that offers tax benefits.

For investments made in ELSS, a deduction of up to Rs 1.5 lakh is allowed under section 80C. These share-linked savings plans have a lock-in period of 3 years, which is less compared to other tax saving instruments. Being a diversified equity mutual fund, it also serves for long-term capital growth as well as tax savings.

In ELSS, investors have the option of investing either through the SIP or by making lump sum investments. Experts say a low lock-in period, potential for capital appreciation, and tax advantages have made ELSS one of the preferred tax-saving investment options in recent times.

Harsh Jain, Co-Founder and COO of Groww, says, “ELSS is one of the most popular categories of equity mutual funds. From January 2020 to March 2021, almost 20% of investors on Groww chose ELSS. Of the total assets under management for the action programs, 17% were allocated to ELSS. “

Here are some other observations regarding the trends of ELSS investments on Groww;

Preferred mode of investment: 15% of investors in the 25-40 age bracket have invested in ELSS funds, and while they showed a slight preference for lump sum investments (41%), a significant percentage has also chose to invest in ELSS via Route SIP (38 percent). On the contrary, up to 54% of investors over 40 have chosen the lump sum as their preferred mode of investing in ELSS.

Industry experts say the reasons for the investment model shown by investors in the 25-40 age group could be due to increased awareness of ELSS as a product and the benefits of investing in funds. actions via SIP, as well as greater financial discipline. Groww data shows that the average amount invested by an ELSS investor on the platform was Rs 43,000.

Month-to-Month Trend: Monthly data from Groww indicates that interest in ELSS peaks in the first quarter of the year. In January, February and March, ELSS transactions are 41.6% higher than ELSS transactions that occur throughout the year. The reason for the increase in ELSS investments during the first quarter of the year could be the deadlines for submitting tax savings evidence that organizations impose, with the tax savings deadline being March 31. .

Harsh says, “Although the lump sum is the preferred mode of investing, investors also go the SIP route to invest in ELSS funds, especially in the 25-40 age group. He adds, “It is important to note that ELSS is like any other equity fund and investing periodically helps cultivate financial discipline and take advantage of average rupee costs. As awareness of ELSS as a product increases, more and more investors are methodically investing in ELSS mutual funds instead of making last minute investments.

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Dorothy H. Lewis