A Step by Step Guide to Invest in ELSS online | Motilal Oswal
A Step by Step Guide to Invest in ELSS online | Motilal Oswal

How to Invest in ELSS Online

What is ELSS?

An ELSS, short for equity-linked savings scheme, is a type mutual funds investment that allocates most of its holdings, often up to 65% of the portfolio, towards equity-linked securities and equities like shares. Sometimes, these funds may also have exposure towards certain fixed-income securities.

A lock-in period of at least three years is applicable to ELSS funds without any option to exit before the date of maturity. There is no upper limit to the amount of an ELSS investment, while the minimum investment required depends on the fund house, and can be as low as Rs 500. Individual investors investing in ELSS can either pay a lump sum or start a monthly systematic investment plan (SIP).

  • Investing in ELSS online

Traditionally, an investor must visit the ELSS fund's or the registrar's office to submit a cheque for the investment amount and a physical form filled out will all required details in order to invest in an ELSS fund.  Here's how to invest in ELSS online-

  • First, an investor must ensure that they have their e-KYC compliance in place.
  • Visit an investment platform or aggregator to view all the ELSS options available to you.
  • Select a scheme that is best suited for your income and your unique circumstances.
  • Complete your registration for the selected ELSS through an authorised channel and receive your folio number.
  • Receive a pre-filled bank mandate and FATCA details from NSE on your registered e-mail address.
     

Remember, you can invest in an ELSS through a growth option, dividend option, and dividend reinvestment option. The growth option does not pay any dividends to the investor but only returns the amount invested, adjusted for losses and gains, upon redemption. Under the dividend option, the investor can enjoy regular dividends decided by the fund house. Should you choose the dividend reinvestment option, the dividend will be invested back into the scheme for the duration of your lock-in period.

ELSS funds are widely regarded as tax-saving investment instruments. Most investors are attracted to these schemes because of this reason. So, it is important to keep in mind that under the dividend option, you will be liable to pay taxes on the entire dividend amount you receive.

  • Tax saving with ELSS

After investing in ELSS, you will be eligible for a tax break as per Section 80C of the Income Tax Act. Investors can get a deduction of up to Rs 1.5 lakh under this provision. Therefore, an individual in the highest tax bracket can save up to Rs 46,800 by investing Rs 1.5 lakh in an ELSS.

On the completion of the lock-in period, however, if an investor redeems their ELSS units, they will become liable for paying taxes. A long-term capital gains tax of 10% on gains of over Rs 1 lakh in a year is applicable on ELSS funds held for more than one year.

Conclusion

Investment in ELSS funds offers returns that can beat inflation, and is tax-efficient. The impact of short-term volatility is little on these funds, and they make for high risk-high return assets. If you are looking for higher returns, have a long investment horizon and do not mind the lock-in period, an ELSS fund could be a good investment opportunity for you.

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