Let’s talk about Equity Linked Savings Scheme (ELSS) of Mutual Funds
ELSS is a great choice to save taxes compared to other traditional investment instruments.

ELSS funds usually invest across a wide range of companies in different sectors.
Mutual funds are a great investment option for many people to grow their money. Apart from the ease of investing and professional fund management, it is an attractive investment choice for them due to the tax benefits it offers. Saving taxes can be a challenge for many people, especially for those who belong to the corporate world. Even if there are plenty of financial products like Fixed Deposits, National Savings Certificates, and Public Provident Fund available to save tax, the return potential of them is limited. So, many people prefer Equity-Linked Savings Schemes (ELSS) for investing, as it can be a great choice to save taxes compared to other traditional investment instruments. Let us check what Equity-Linked Savings Schemes is and how it benefits taxpayers.
Equity Linked Savings Scheme funds
Equity Linked Savings Scheme funds (ELSS) are tax-saving mutual fund schemes primarily invest in stock market, ideal for investors who plan to generate wealth and save taxes. These mutual fund plans stands out from other schemes with its high return potential and partially taxable nature. A mandatory lock-in period of three years is the main feature of ELSS. The lock-in period of 3yrs fund managers get sufficient time to manage the investment properly, and make good returns for the investors. You can sell this fund only after three years from the date of its purchase. Instead of lump sum, if you opt for SIP for your ELSS investment, each installment of it has a separate lock-in-period of three years. That means each of them has different maturity date.
If you consider the lock-in-period of other saving investments, Equity Linked Savings Schemes have the advantage of the shortest lock-in-period allowed under section 80C of the Income Tax Act. With such mandatory lock-in-period, investors can withstand the ups and downs in the share market and acquire good returns. Anyone who plans to save tax in 80C of the Income Tax Act can consider investing in ELSS. As an equity-based investment, it is ideal for those who are looking for long-term plans and open to risks. With a lock-in period of three years, the gains from ELSS are treated as long-term capital gains and taxed at the rate of 10% for the gains over Rs.1 lakh.
Features of ELSS
- Mandatory to invest at least 80% of the total investment corpus in equity or equity-oriented instruments
- Lock-in-period of three years
- No maximum tenure of investment
- Income from ELSS investment treated as long-term capital gains and taxed as per the tax rules
- Investors can avail tax exemption under 80C of the Income Tax Act on the invested amount
Advantages of Equity-linked savings scheme
Diversification: ELSS funds usually invest across a wide range of companies in different sectors. Such an investment method helps to add the diversification element to your portfolio.
Minimum-lock-in period: Equity Linked Saving Scheme has the shortest lock-in period of three years for taxation purposes. Many alternatives to ELSS like Public Provident Fund (PPF), National Saving Scheme (NPS), and Fixed Deposits have a lock-in period of more than three years. The lock-in period of PPF is 15 years, whereas NPS has a lock-in period of 18-20 years. So, with the shortest lock-in period, ELSS can provide maximum tax benefits to investors with high returns. The returns from most of the investments are fully taxable, but the returns from ELSS are partially taxable.
Low amount to start investing: Investors can start their ELSS schemes even with a low amount of Rs.500. There is no need to amass a large investible corpus in ELSS to start your investing.
SIP: Most people prefer investing in their ELSS mutual fund scheme through the SIP method, even if it allows a lump sum investment option. It helps them to create wealth by investing in small amounts, and at the same time, they can enjoy the tax benefits.
Taxation: As a tax saving scheme, an investor can avail a tax benefit up to Rs. 46,800 under section 80C of Income Tax Act by investing up to 1.5 lakhs in ELSS. Even if you invest more than that, tax benefits avail only up to Rs.1.5 lakhs.
That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.
With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh
Related Links:
- 10 Things to know before finding best mutual funds for SIP
- 11 Difference between stocks and mutual fund
- Are you prepared for your retirement?
- As an investor, what should you look into an offer document (OD)?
- Asset Allocation is Important
- Attaching goals while investing in mutual funds
- Balanced Mutual Funds in India
- Benefits of investing in mutual funds in India
- Conservative hybrid funds
- Difference between Exchange Traded Funds (ETF) and Index Funds
- Does Mutual fund provide risk diversification?
- Dynamic Asset Allocation Funds or Balanced Advantage
- Effects of Mutual Fund on Indian Economy
- Entry load and exit load in Mutual fund
- ESG funds (Environment, Social and Governance)
- Factors influencing the investments decisions of retail investors in Mutual funds
- Gilt free Gilt mutual Funds
- Gilt Fund with a 10-year constant duration
- How do you evaluate mutual funds’ performance?
- How mutual fund systematic transfer plans or STP work
- How side pocketing works in mutual funds?
- How single mothers can secure their children’s future
- How SWP from Equity Hybrid Funds can be useful to get regular return
- How to check your mutual fund KYC status online
- How to invest online in mutual funds in India
- How to start SIP in mutual fund?
- Hybrid Funds- to enjoy the best of both equity and debt funds
- In India how to invest in mutual funds
- Know about nomination in mutual fund schemes
- Know the advantages of starting your SIP early
- Let’s talk about Equity Linked Savings Scheme (ELSS) of Mutual Funds
- Let’s talk about Venture Capital Funds
- Low Duration Mutual Funds
- Medium Duration Mutual Funds
- MF is a retail product designed to target small investors, salaried people and others
- Mistakes to avoid while investing in mutual funds
- Mutual fund for children’s higher education
- Mutual Fund KYC How you can do
- Mutual fund past performance and consistency
- Mutual funds and Insurance plans
- Mutual funds for Beginners
- Penetration / Reach of Mutual Funds in Tier-3 Cities
- Regular mutual funds over Direct plans
- Selecting a mutual fund scheme
- Should I opt for SIP or bulk investment?
- Start online mutual fund SIP Investments
- Taking a loan against mutual fund investments
- The common myths about Mutual fund NAV
- The difference between Mutual Fund and ULIPs
- The different types of mutual funds in India
- The investor’s perception and preference towards Mutual funds
- The Mutual Funds in India
- The number of different schemes should one invest in?
- The role of a Fund Manager in the Mutual Fund scheme
- The working of Arbitrage Mutual Funds in India
- The working of Asset Management Companies in India
- Time is Precious
- Value Investing with Value Funds
- Various types of Equity Mutual Funds in India
- What are Banking and PSU Funds
- What are Corporate Bond Funds
- What are Credit Risk Funds
- What are diversified equity mutual funds?
- What Are Dynamic Bond Funds
- What are Growth Schemes?
- What are income mutual funds or income schemes in mutual find?
- What are index funds?
- What are Interval Mutual Fund Schemes?
- What are large cap mutual funds?
- What are Liquid Mutual Funds?
- What are mid and small cap mutual funds
- What are Money Market Mutual funds?
- What are Multi-Asset Allocation Funds
- What are mutual fund debt funds?
- What are Mutual Fund Fixed Maturity Plans
- What are Mutual Fund Monthly Income Plans
- What are mutual fund tax benefits
- What are Offshore Funds?
- What are Overnight Funds?
- What are sectoral mutual funds?
- What are the benefits of investing in mutual funds versus directly in shares
- What are Top Performing Mutual Funds in India
- What are ultra-short term debt mutual funds?
- What happens to money invested, If a mutual fund scheme is wound up?
- What if a fund changes its strategy?
- What is a Fund of Funds (FoF) scheme?
- What is Equity Saving mutual Funds
- What is Floater Fund?
- What is Gold ETF
- What is NAV of mutual fund
- What is SIP Top-up, and what are its benefits?
- What is tax saving mutual funds and how can it help create long term wealth
- What is the difference between an open-ended and close-ended scheme
- What should I do if fund’s poor results persist?
- When should you change your investment plan?
- Which is the best mutual fund according to your risk appetite
- Who and How are mutual funds regulated?
- Why should you consider Fund Costs?
- Why should you invest through Mutual Funds?
- Why should you monitor and review your fund
- Why SIP in Mutual Fund
- You Should Increase SIP Amount Now
- Alternative to Fixed Deposits