ELSS (Equity Linked Savings Scheme) and traditional mutual funds
differ primarily in their investment objectives and tax benefits. ELSS is a specific category of mutual funds that invests predominantly in equity and equity-related instruments with the dual purpose of wealth accumulation and tax savings. ELSS offers a significant tax-saving advantage, With tax benefits under Section 80C deducted up to ₹1.5 lakh annually. These investments come with a three-year mandatory lock-in period, promoting a disciplined approach to long-term investing.
Conversely, mutual funds encompass a broader spectrum of investment options, including equity, debt, hybrid, and Thematic funds come in different flavors to match your risk tolerance and financial goals. Unlike ELSS, most mutual funds do not have a specific lock-in period, offering liquidity to investors who may need to redeem their investments at shorter notice. Mutual funds also vary in taxation based on asset allocation and holding period.
While both ELSS and mutual funds pool investors' money into professionally managed portfolios, ELSS stands out for its tax-saving benefits and focused equity exposure with a mandatory lock-in period, making it suitable for investors seeking wealth creation and tax efficiency.
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