Difference Between ELSS and Equity Mutual Funds?
1. Ordinary equity mutual funds don't have a lock-in period, however there is a exit load for some of the equity funds. So primary duty of fund managers are continually ensuring they have a enough liquidity portfolio to meet redemption. How in ELSS mutual funds, Since each funds has a secure of 3 years, what it means is that fund managers can accept long term stocks for better returns. It additionally implies that fund supervisor does not get stress over short-term redemption pressure.
2. Many times you would see lower turnover ratio in ELSS as against Large cap mutual funds. This is one of the primary reasons that profits are somewhat higher. Fund managers at that point can pick esteem and high growth stocks relying upon his command of the reserve. Notwithstanding, one thing remains is that ELSS has holding period lot higher than equity mutual funds.
3. The essential advantage of ELSS over equity mutual fund is tax exemption.Your contributed amount is charge under tax exemption upto limit under Section 80C of Income Tax Act of India (For example: Section 80C has limit of Rs.1.5 lakhs). Whereas such benefits are not applicable for equity mutual funds.
4. ELSS vs Equity Mutual Funds has one thing in common that is, any dividend amount is tax free in both the scenarios.
5. An additional advantage of ELSS vs Equity Mutual Funds is at the time of redemption. Income / profit generated at the time of redemption of ELSS mutual fund is exempted from tax in India. For ELSS in the event that you don't hold for 3 years lock-in period, then it is taxable. Whereas this is not the same for equity mutual funds. Any profits either long-term gains or short-term gains are taxable under different section of Income Tax Act of India.