ELSS Mutual Funds – Wealth Building with Tax Saving

Posted On Thursday, Dec 30, 2021


Table of Contents
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What is ELSS Mutual Fund


How does ELSS Mutual Fund Redemption work


What are ELSS Mutual Fund Tax Benefits


ELSS Mutual Fund Calculator

Let us begin with a quick question.

What is your objective for investing in Mutual Funds?

Build Wealth?

Get long term risk adjusted returns?

Save on Taxes?

And now to a bigger question...

Which one of these above have you achieved?

Honesty, it is kind of a difficult task to achieve more than one of these objectives at the same time.

But hold on!

What if we told you that you can achieve all 3 of them at the same time?

If that is something that excites you, read ahead.

Today, we will tell you about one type of mutual fund that could achieve all the above three objectives.

ELSS Mutual Funds:

To begin with, it is very important that an investor knows the ELSS Mutual Fund meaning.

An ELSS Mutual fund or “Equity-Linked Savings Scheme” Fund is a type of mutual fund that minimum investment in equity & equity related instruments - 80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance). However, they may have some exposure to fixed-income securities as well.

This should make the ELSS Mutual fund meaning clearer for you.

The best part is the ELSS Mutual fund tax benefit. It is, after all, the category of equity mutual fund scheme that can save tax under the ambit of Section 80C of the Income Tax Act, 1961.

You can actually qualify for tax exemption of Rs.1.5 lakh and end up saving save up to Rs 46,800 a year in taxes provided you are in the highest tax bracket by investing in ELSS mutual funds.

Not to forget the other USP of ELSS Mutual Funds – It has a lock-in period of just 3 years, which is the shortest when compared to other Section 80C investments.

Now that you know the ELSS Mutual Fund Meaning, it only makes sense for you to know more about ELSS Mutual Fund returns.

There is one tool that could help you get an idea of the same.

ELSS Mutual Fund Calculator:

An ELSS Mutual Fund Calculator is simply a simulation with the help of which an investor can estimate the value of ELSS investment over a given period of time.

All one has to do is input some basic numbers in the ELSS Mutual Fund Calculator and it comes up with the results.

Here is what an ELSS Mutual Fund Calculator needs as input:

1. The mode of investment - SIP or lump sum,

2. The investment amount

3. In the case of an SIP, the frequency of investment

4. Your expected rate of return per annum

5. Investment tenure or duration

Once you enter all these details, an ELSS mutual fund calculator will give you an idea of the amount you can expect your investment to have accumulated in the specified investment tenure.

This helps investors to align their investments with their requirements.

Once you have invested in ELSS Mutual funds, after the lock-in period of 3 years, you can start redeeming your units.

Let’s see how ELSS Mutual Fund redemption works.

ELSS Mutual Fund Redemption:

In the case of Mutual funds, redemption is when investors sell their fund units.

There might be an exit load that investors have to pay when they redeem their units.

When an investor redeems his/her units, they earn what is called “Capital Gains”. These capital gains are taxable and the amount of tax depends on the period for which the investor held his investments in the fund.

When an investor sells his units or redeems them, it completely depends on the investor’s goals. Once an investor thinks he has achieved what he set out for with a particular fund, he/she can consider redemption.

Following are the ways for ELSS Mutual Fund redemption:

A. The DEMAT Account Way: This one is for investors who invest in mutual funds through their DEMAT accounts. The redemption goes through the same DEMAT account, and once the process is completed, the redemption payout comes into the bank account linked to the DEMAT account directly.

RTAs (Registrar & Transfer Agents) There are some RTAs like CAMS or Karvy that work in coordination with mutual fund companies and distributors, and allow investors to redeem from their mutual funds online or through a mobile app.

B. AMC: This is for investors who invest in a mutual fund directly through an asset management company (AMC). AMC’s have online portals from where you can redeem your units. Once your request is processed, the redemption amount will come to your bank account linked with the AMC, or they can send a cheque to your registered address as well. This is comparatively the fastest way for redemption.

So, you are now well versed with the ways of ELSS Mutual fund redemption.

Now before we leave, allow us to tell you one more time about the biggest benefit of ELSS Mutual Funds.

ELSS Mutual Fund Tax Benefit:

As we have already told you, ELSS mutual funds are the only class of mutual funds, that come under the ambit of Section 80C of the Income Tax Act, 1961.

Which means they give you a tax benefit.

When you invest in an ELSS Mutual Fund, you get tax benefit of Rs.1.5 lakh and and save up to Rs 46,800 a year in taxes, provided you are in the highest tax bracket.

You see, there is one thing you must know about ELSS Mutual Fund redemption. When you redeem units of ELSS Mutual Fund, the amount you get is not tax-free. Only long-term capital gains up to Rs 100,000 are tax free. Any long-term capital gains over Rs 1,00,000 a year are taxed at a rate of 10% plus applicable cess and surcharge.

In the case of the IDCW option, the income distributed from your ELSS mutual fund investments are simply added to your overall income and taxed according to the income tax rate slab you fall into.

Despite all this, ELSS Mutual funds are still considered as one of the best tax-saving investment option under Section 80C of the Income Tax Act, 1961.

Hence, it makes sense to make the most of ELSS Mutual Fund Tax Benefit.

For your benefit, we want to share with you the details of one of the prominent ELSS Mutual Fund Scheme.

Quantum Tax Saving Fund - An open Ended Equity Linked Saving Scheme with a Statutory Lock in of 3 years and Tax Benefit.

This fund optimizes tax-saving under Section 80C, minimizes risk by pursuing bottom-up stock selection approach and has a lower portfolio turnover.

Also, it holds cash when stocks are overvalued - no derivatives and no hedging.

One of its major USPs is that it has among the lowest expense ratio in its category.

We think you now have a better understanding of what ELSS Mutual Funds are, now that we have told you about ELSS mutual fund calculator, ELSS mutual fund tax benefit, ELSS mutual fund redemption and the overall ELSS mutual fund meaning.

So, if you want to start with an ELSS Mutual fund investment, you can start with us right here.

Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Risk-o-meter of SchemeRisk-o-meter of Benchmark
Quantum Tax Saving Fund

(An Open Ended Equity Linked Saving Scheme with a Statutory Lock in of 3 years and Tax Benefit.)

Primary Benchmark: S&P BSE 500 TRI
• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index and to save tax u/s 80 C of the Income Tax Act. Investments in this product are subject to lock in period of 3 years.
Quantum Tax Saving Fund
Investors understand that their principal will be at Very High Risk
Quantum Tax Saving Fund
*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
The Risk Level of the Scheme in scheme Risk O Meter is basis it's portfolio as on November 30, 2021.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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