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In the last few years, investors' inclination towards Equity Linked Savings Scheme (ELSS Funds) has increased a lot. Due to this increasing popularity, people now also want to know the advantages and disadvantages of ELSS funds. Apart from the drawback of 3 3-year lock-in period, there are not many drawbacks in ELSS funds. But ELSS has many advantages. Let's know what are its advantages and disadvantages.

Advantages of ELSS
Benefit of compounding returns
It is generally advisable to invest in equity funds for a long period of 5-10 years. ELSS funds, due to the lock-in period of 3 years, are a disciplined long-term investment option. In this process, it helps investors to take advantage of the power of compounding returns in the long term.

Redemption is not necessary after 3 years.
If investors are satisfied with the returns received from ELSS funds, they can continue with them. Redemption is not necessary after 3 years. This is only the minimum investment period. However, there is no maximum investment period.

High returns
ELSS funds invest in equity schemes. Hence, their returns are high (10-12%). ELSS gives an average return of between 10%-12%. This is the highest compared to safer options like PPF and FD over a period of 5 years.

SIP option available
When investing in ELSS, investors can choose the SIP option. It allows the investor to invest a fixed amount at regular intervals. It allows salaried class people to invest a fixed amount from their savings periodically, usually every month.

Safe and transparent

Investing in mutual funds is very transparent. All mutual fund companies come under the purview of SEBI and have to make necessary disclosures.

Disadvantages of ELSS

No tax benefit in the new tax regime
In the old tax regime, investment up to Rs 1.5 lakh in ELSS was tax-deductible. But this benefit is not available in the new tax regime. In such a situation, the question that will come to anyone's mind is why not invest in any other equity fund, which has no lock-in period, and one can expect higher returns. Because there is no benefit in this under the new tax regime.

Lock-in period is also a disadvantage.

Lock-in period is also a disadvantage. Because if during 3 years you feel that some other investment option is performing better than your ELSS fund, then also you cannot withdraw money from it.

There is also risk

ELSS invests in equity. Therefore, there is also risk in it. Because equity instruments are volatile. By comparing all these advantages and disadvantages, you can see whether ELSS is beneficial for you or not.

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