Equity Linked Savings Scheme (ELSS) is an open-ended mutual fund that invests at least 80% of its assets in equity and equity-related instruments. ELSS mutual funds are the only type of mutual funds whose investments qualify for tax saving under Section 80C of the Income Tax Act, 1961. Moreover, ELSS mutual funds have a three-year lock-in period. During the lock-in period, you will not be able to withdraw the investments.
Since ELSS qualifies for tax exemption, it competes with products such as the PPF, NPS, tax-saving fixed deposits, national savings certificates, etc. But unlike these other instruments, which are mostly fixed income products, an ELSS is a pure equities product. This indicates that ELSS is considered a wealth-generating asset instead of a savings program.
Having said that, ELSS funds are exposed to market risks, and hence the investments are highly volatile. However, with a long-term investment tenure, an investor can average out the effect of market volatility. Since ELSS invests in stock markets, it has a greater potential to generate higher returns.
Step By Step Guide To Investing In ELSS Mutual Funds
To begin investing in mutual funds, it is necessary to comply with Know Your Customer (KYC) regulations. This is as per the Securities and Exchange Board of India (SEBI) regulations. Without the KYC, you cannot invest in mutual funds.
If you are a first-time investor, you will be expected to comply with KYC requirements through a Sebi-registered intermediary—mutual fund firms, distributors, or online platforms—using the KRAs (KYC registration agencies). Sebi has mandated this one-time procedure to prevent fraud. It entails confirming your identification as an investor in a mutual fund.
Offline KYC
The following steps will help you complete your KYC process offline:
- Complete the KYC form.
- Attach self-attested copies of your identification and proof of address.
- Sign and paste a passport-sized photograph into the form.
- Visit the branch of the fund house, RTA, or investor service centre to verify your identity in person.
- The original documents must be shown for verification.
Online KYC
You can complete your KYC process online by following the below steps:
- Visit the website of AMC/ fund house or the KRA and submit your personal information to register.
- Upload/ submit scanned photos of required documents.
- Perform in-person verification via video call.
- Digitize the document’s signature.
Documents Required for KYC
You must maintain a collection of documents for KYC verification and investment purposes.
Proof of identity: PAN card and any one of a passport, Aadhaar card, driver’s license, or voter identification card.
Latest photograph.
Address Proof: Aadhaar, Passport, Driver’s license, Voter identification card, Utility expenses (gas, telephone, electricity) or statement of account or passbook
While investing, a Bank account number, IFSC code, Email address, and phone number are required.
Invest in ELSS Mutual Funds
Once you are KYC compliant, you can invest in ELSS funds either through an online or offline route.
Online
You can invest in mutual funds through any of the following ways:
Fund House Website
Visiting AMC’s website enables direct online investment in mutual funds. The procedure is as follows:
- Create a new account
- Fill in all the necessary details in the form.
- Fill FATCA form
- Provide bank details
- Upload a photograph of the canceled cheque.
- Verify KYC using Aadhar and then transfer funds.
FinTech Start-ups
Investing in a mutual fund is simple when you use an online investment platform. The portal provides a single access point for investing, tracking, and managing mutual fund investments with several AMCs.
The required steps for investing through an online investment platform are as follows:
- Create an account on the investing platform
- Pick a suitable ELSS mutual fund.
- Choose the payment method and amount (SIP or lumpsum).
- Fill up your personal information such as PAN and bank details.
- Transfer funds online to conclude the transaction.
Registrar Website
You can begin investing at any of the Sebi-registered RTAs by submitting a completed application form and a cheque or bank draft at the branch office. CAMS and Karvy are two of the most prominent RTAs.
Offline
You can physically go to the mutual fund office or RTA office and submit the form along with all the necessary documents.
Alternatively, you can also have an agent or distributor who will help you with the investing process.
