Investing is an essential part of financial planning. While there are various investment options available, mutual funds have been gaining popularity over the years. And among mutual funds, ELSS or Equity-Linked Saving Scheme has become a preferred investment option for many due to its tax-saving benefits. In this article, we explore the benefits of the best ELSS mutual funds and how they can help you save big.

What is an ELSS mutual fund?

ELSS mutual funds are mutual fund schemes that invest predominantly in equity and equity-related instruments. Investments made in ELSS are eligible for tax benefits under Section 80C of the Income Tax Act, up to a limit of ₹1.5 lakh per annum. Additionally, these investments come with a lock-in period of three years, which ensures that investors stay invested for the long term.

Benefits of investing in ELSS mutual funds

1. Tax savings - The primary benefit of investing in ELSS mutual funds is the tax savings that it offers under Section 80C of the Income Tax Act. Investors can claim a tax deduction of up to ₹1.5 lakh on the investments made in ELSS.
2. Higher returns - ELSS mutual funds usually invest in equity and equity-related instruments, which have the potential to provide higher returns over the long term. As these funds come with a lock-in period of three years, investors can benefit from the compounding effect over time.
3. Diversification - ELSS mutual funds invest in a diversified portfolio of stocks, which helps in reducing the risk of concentration in a single stock or sector. This diversification helps in providing stable returns even during market volatility.
4. Flexibility - ELSS mutual funds offer the flexibility of investment through a Systematic Investment Plan (SIP) and lumpsum. With the help of a SIP calculator online, investors can estimate their potential returns by investing small amounts of money regularly over a longer tenure.
5. Long-term savings - ELSS mutual funds come with a lock-in period of three years, which means that investors can benefit from the power of compounding over the long term. This helps in achieving long-term savings goals, such as retirement planning, child education, or buying a house.

Selecting the best ELSS mutual fund

While selecting the best ELSS mutual fund, investors should consider various factors such as the fund's performance, portfolio, risk profile, expense ratio, and the fund manager's experience. Additionally, investors should also consider their investment objectives, risk appetite, and investment horizon before selecting a fund that suits their needs.

In conclusion, investing in ELSS mutual funds can provide a great opportunity to save tax and achieve long-term financial goals. By selecting the best ELSS mutual fund and investing regularly, investors can maximize their returns while minimizing the risks. With the help of online tools such as SIP calculators, investors can estimate their potential returns and make informed investment decisions.