NEW DELHI: Equity linked savings scheme, or ELSS mutual funds offer an option of saving taxes under Section 80C of the Income Tax Act, 1961 in the old tax regime.
Like in any other mutual fund, investments in ELSS can be done either as a lumpsum, or through SIP (Systematic Investment Plan).
But which is the better of the two, and which is easier to withdraw?
Confused? Let’s make it simple:
SIPs allow one to smooth out market fluctuations over the investment period.
For tax purposes, it does not really matter which option an investor chooses. But for withdrawal, the two work a bit differently.
All ELSS investment have a “lock-in” period of three years.
An amount invested as a lumpsum can be withdrawn in entirety after three years. But not so for SIPs.
Here, each SIP installment must individually complete its three years “lock-in” before it can be withdrawn without incurring penalties.