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The ICICI Prudential Long Term Equity Savings Fund, also commonly known as the ICICI ELSS Mutual Fund, is a tax saving scheme in the Equity Linked Savings Scheme (ELSS). Managed by ICICI Prudential Asset Management Company, the open ended Equity Mutual Fund gives you an opportunity to grow your savings by primarily investing in equity and related securities and provides tax benefit under Section 80 C of Income Tax Act, 1961.
Like any other mutual fund scheme, the ICICI Prudential Long Term Equity Fund comes primarily in two plans: the Growth Plan and the Dividend Plan.
The growth plan is different from the dividend plan by one major factor. The growth plan does not pay out funds to the investors. This means all the profits earned on the investment fund are reinvested and thus enables the investor to get the benefit of compound wealth growth. Since the profits and income generated from this scheme are reinvested, the growth plan typically gives you a better year on year benefit and is best suited for long term investments. The growth plan is the best bet for getting maximum returns in the long run, but for those looking to get regular returns on their investments, the dividend plan is recommended.
The dividend plan, on the other hand, pays out dividends out of the profits earned directly to the investor's account. Since the dividend plan regularly pays out dividends out of the profits to the investors, the NAV (Net Asset Value) reduces. The primary reason behind this is because most investors use the dividends earned for other purposes than reinvesting in the scheme. The dividend plan is best suited for those looking for regular disbursement from their investment. Thus, dividend plan is better suited for retired individuals or those who are looking for a regular income, but have the risk appetite to invest in equity-linked schemes.
ICICI Prudential Long Term Equity Fund allows investors to opt for the following options for investment.
ICICI ELSS Mutual Fund is a long term wealth creation solution that aims to generate long term capital appreciation by investing primarily in equity and related securities. The key benefits of the mutual fund are as follows.
As is case of any ELSS mutual fund scheme, ICICI Prudential Long Term Equity Savings Scheme too comes with a mandatory lock-in period of three years. Compared to other long term investment products, like NSC (National Savings Certificate), PPF (Public Provident Fund), and others, the tenure for ELSS scheme is lowest. This short lock-in period also allows you or your fund manager to make better decisions in situations of interim volatility.
Unlike other equity-based schemes that are taxable after returns, ICICI ELSS Mutual Funds offer the benefits of equity schemes with the added features of being a tax saving instrument. Under Section 80 C of the Income Tax Act, 1961, ELSS mutual funds are eligible for tax deductions of up to Rs. 1,50,000. ICICI ELSS mutual fund can save up to Rs. 46,350 (tax benefit on investment of Rs. 1.5 lakh at the highest tax slab rate of 30.90%).
Like most other mutual fund schemes, ICICI ELSS Mutual Fund can be started at a SIP (Systematic Investment Plan) as low as Rs. 500 and has no upper limit.
The ICICI ELSS Mutual Fund is known for being a high performer and has given calculated returns of 6.84% in the first year, 10.25% in the first three years, and up to 18% in the first five years. Thus, this scheme will enable you to beat the benchmark by wide margins, if you plan for long term investment.
The ICICI ELSS Mutual Fund does not charge any fees on entry load or exit load for investing. This is a big plus for early investors as there are no additional fees on their returns.
Although the ICICI ELSS Mutual Fund is an investor’s best bet for the long run, it cannot guarantee assured returns in the presence of market risks. Like any other ELSS mutual fund, the fund aims to attain long term wealth maximisation by predominantly investing in equity, debt, and money market instruments. This diversified approach enables the ICICI ELSS Mutual Fund to invest in the large cap as well as mid cap markets with the objective of long term appreciation in capital. Thus, the scheme is susceptible to market risks and does not guarantee a fixed return value in volatile conditions.
This makes it a moderately high risk bet and so should be preferred only by investors who have a long-term horizon for their investments, i.e. up to five years or more. For investors looking for stable growth and sizeable returns on a regular basis, investing in the equity-linked scheme may not be a good choice and should be limited. There are safer options like Unit Linked Insurance Plan (ULIP), National Savings Certificate, National Pension Scheme, Public Provident Funds, Bonds, etc. that can be recommended. When investing in an ELSS mutual fund or any other equity-based scheme, remember the following points.
Market volatility can mean the performance of the scheme is not guaranteed and can at times lead to drops as well. Thus, ICICI ELSS mutual fund is ranked as a moderately high-risk portfolio.
Before investing, always have a look at the performance of the scheme and make appropriate decisions. However, understand that the past performance of any financial product cannot be guaranteed depending on past performance. The performance of any scheme depends on financial conditions around the time you plan to withdraw your returns.
"Mutual Fund investments are subject to market risks, read all scheme related documents carefully."
Get in touch with a financial planner or study investment options online to make sure your investment aligns with your financial plans. There is no scheme that is best fit for all and investors must gauge their financial goals and risk appetite before beginning investing.
Like any other ELSS mutual fund, if you are opting for the SIP, the actual returns will depend on starting month and year of the SIP, actual month of maturity and year of the SIP, valuation date, and the amount invested in the SIP.
How much tax benefit can you get with ICICI ELSS Mutual Funds?
Under Section 80C of the Income Tax Act, 1961, ELSS mutual funds are eligible for tax deductions of up to Rs. 1,50,000. ICICI ELSS mutual fund can save up to Rs. 46,350 (tax benefit on investment of Rs. 1.5 lakh at the highest tax slab rate of 30.90%)
What happens once the three-year lock-in period for the investment is over?
After the three-year lock-in period is over, the investor is eligible to decide on retaining the investment or redeeming the investment. Once the repurchase or buyback request has been raised, the fund house will dispatch the redemption process within ten days under ideal circumstance from the date of receipt of the request.
What are the essential documents for investing in ICICI ELSS mutual funds?
There are two methods to start investing in any mutual fund schemes. The requirements for those are as follows.
If you plan to raise the investment request offline, you will need basic KYC (Know Your Customer) documents, like Aadhaar Card, PAN Card, and other identification proof, a post-dated cheque with the bank you want to link your mutual fund scheme with and complete investment forms or bank mandate.
If the request is raised online, the investor must complete online Aadhaar based KYC process. Once the online registration is complete, investors have to fill out the pre-filled bank mandate that will be sent to their registered email address. Once the KYC documentation and required documents are uploaded, the process is complete.
Which is a better form of investment in ICICI ELSS mutual funds- SIP investment or lump sum investment?
Although both options have their own pros and cons, a Systematic Investment Plan (SIP) is a recommended method by financial experts given the impact on short term volatility in investments. In addition, investors are saved from making a lump sum availability of funds and can follow a disciplined approach.