What Makes Equity Linked Saving Schemes A Better Option Than Other Saving Instruments?

The answer is really very simple. When you invest in ELSS mutual funds, you not only save the amount permissible by the government, you also stand to gain from it, because of the high rate of return.

There are, of course, many reasons why you should go the ELSS way.

• The returns are really very good – the year ending 2005 saw ELSS as the best performing in the mutual fund category, showing returns of nearly 60%. In fact, a number of funds have appreciated by more than 80% in their three-year period. However, though in the past few years things have not been so good due to the economic downturn and recession effects, remember equities are long term investments that yield better in the long run ( a span of 10-12 yrs)
• These funds have a lock-in period of three years, which prevents you from unnecessary withdrawals and spending and helps earn a return over time. However, remember to stay invested for longer periods of time to the tune of 10-12 years to reap the best of returns.
• Also, the lock in gives fund managers the freedom to take sector and stock bets, which they are not able to do in the regular equity schemes.
• The dividends you earn will be tax free.
• When you sell the units of these funds, you can avail of the long-term capital gain for which there is no tax. If you sell after one year, you pay no tax. 

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