ELSS

Equity Taxing Saving Mutual Funds aimed at enabling investors to avail tax rebates under Section 80 C of the Income Tax Act.

Scheme ICICI Prudential R.I.G.H.T. Fund Dividend ICICI Prudential R.I.G.H.T. Fund Growth Axis Tax Saver Fund - Growth Axis Tax Saver Fund - Dividend BNP PARIBAS Tax Advantage Plan (ELSS)-Dividend Option BNP PARIBAS Tax Advantage Plan (ELSS)-Growth Option

Advantages of ELSS Lock-in for three years prevents unnecessary withdrawals and allows your money to grow over a period of time Investments in equity over a long-term delivers better returns than that of other savings instruments and similar to other equity schemes Tax savings and high returns Flexibility to Invest in small amounts through a Systematic Investment Plan.

How to start an ELSS account? The investor can use the services of a mutual fund distributor or directly approach the fund house for making investment in the ELSS. The distributor would provide the application form or one could download it from the website of the Fund House. The investment could be made in a single name or one could add second and/or third applicant. For investing in ELSS or for that matter in any scheme of a Mutual Fund the investor should have a PAN card. If he or she wishes to invest Rs 50,000 or more he or she should be Know Your Client (KYC) compliant. These criteria would also be applicable for all the joint applicants. The duly filled-in application form along with the cheque and other documents need to be submitted at the Investor Service Centre of the Fund House on any business day before the cut-off time of 3.00 p.m. to get the units allotted at the NAV of that day. The Fund House normally sends the

Account Statement within 3 to 4 working days. If the investor provides the e-mail ID in the application form, the account statement could be sent by e-mail. Many Fund Houses also offer the facility of investing in the Fund online through their websites. Recently, the regulator has also allowed the registered stock brokers to offer the facility of investing in Mutual Fund Schemes to their clients through the stock exchange mechanism.

What is the lock-in period for ELSS?

There is a lock-in period of 3 years from the date of allotment. This means that after investing in the scheme, the investor cannot redeem or withdraw the invested amount for a period of 3 years. But, this is one of the major advantages of ELSS since it has the lowest lock-in period as compared to the other taxsaving instruments like PPF, NSC and bank fixed deposits etc. Investors who want periodic dividends can consider the dividend payout option under the ELSS category, wherein the dividends received are also tax free. In fact, this is the only investment option under Section 80C which provides interim cash flow during the lock-in period. What should be the criteria for choosing ELSSs offered by the different MFs? The investor should apply the following criteria while selecting an ELSS for an investment: (i) The track record of the fund at least over the last 2 to 3 years. One should not attach too much importance to the recent 1-month or 3-month performance. (ii) The dividend history of the fund. (iii) It is not necessary that the investor should select an ELSS based on its large size. (iv) The discerning investor could also look at the portfolio of the scheme to ensure that it is well-diversified across market caps. (v) If the investment amount is more than Rs 20,000, then probably the investor could select two ELSS funds instead of one. It could be a mix of an established name and an upcoming fund.

How to start an ELSS account?

The investor can use the services of a mutual fund distributor or directly approach the fund house for making investment in the ELSS. The distributor would provide the application form or one could download it from the website of the fund house. The investment could be made in a single name or one could add second and/or third applicant. For investing in ELSS or for that matter in any scheme of a mutual fund the investor should have a PAN card. If he or she wishes to invest Rs 50,000 or more then they should be Know Your Client (KYC) compliant. These criteria would also be applicable for all the joint applicants. The duly filled-in application form along with the cheque and other documents need to be submitted at the Investor Service Centre of the fund house on any business day before the cut-off time of 3 pm to get the units allotted at the NAV of that day.

The fund house normally sends the account statement within 3 to 4 working days. If the investor provides the e-mail ID in the application form, the account statement could be sent by e-mail. Many fund houses also offer the facility of investing in the fund online through their web sites. Recently, the regulator has also allowed the registered stock brokers to offer the facility of investing in mutual fund schemes to their clients through the stock exchange mechanism. How much should one invest in ELSS? The amount that needs to be invested in ELSS would depend on the other investments already committed towards PPF, EPF, insurance etc. A young investor could use the entire limit of Rs 1 lakh for investing in ELSS if s/he is not investing in other tax-saving instruments under Section 80C whereas an aged investor could decide on a mix of three or four investment options. But, an investor should not ignore the ELSS option because this is the only option which has the potential of delivering higher returns. Click NEXT to read the other benefits of investing in ELSS schemes.

Which fund houses offer ELSS? Can an investor combine it with SIP?
Most of the fund houses offer ELSS. Yes, ELSS funds offer the facility of SIP. Ideally, a salaried investor should start her/his SIP in an ELSS fund in the month of April itself so that s/he gets the benefit of rupee cost averaging and s/he need not have to worry about the cash flow problem at the end of the financial year. What are the other benefits of ELSS fund? An ELSS fund should definitely figure in the tax-saving list of every tax payer. Tax-saving is not only about investing for saving taxes but it should also have the potential for wealth creation in the long run. Among all the tax-saving instruments only ELSS offers this potential for wealth creation. Even though ELSS fund has lock-in period of 3 years it does not mean that the investor should necessarily redeem her/his holdings after completion of 3 years. It could happen that at that given point of time the equity markets may be down and consequently the NAV of the ELSS fund could also be low. One could allow it to remain in the fund for a much longer period. One should think of redeeming only if s/he are genuinely in need of funds or the ELSS, where the investor has invested, has underperformed the peer group.