All You Need to Know About The Tax-saving ELSS

Introduction to the ELSS

This article will help you learn more about Equity Linked savings Scheme Funds and how they can save you tax on mutual funds. ELSS stands for Equity Linked Savings Scheme. It can help you save up to Rs. 1.5 lakhs according to Sec 80C. ELSS investments have a lock-in period that lasts three years. This scheme is great for growing your money because it offers both growth and dividend options. You can choose to invest in ELSS via SIP (Systematic Investment Plans).

ELSS funds can invest as much as 65% in equity. You need to be aware market risks. These funds are more risky than other tax-saving options like 5-year FDs or PPF (Public Provident Fund), NSC (National Savings Certificate) and others.

  • ELSS Investment features Favorable lock in period: This is one of the benefits of ELSS funds. Its lock-in period is only three years, compared to five years for tax-saving FDs. ELSS has the shortest lock-in period of any tax-saving scheme.
  • Helps to Save Taxes: As we have already mentioned, ELSS is one the most effective instruments to reduce taxes by up to Rs. 1.5 lakhs annually. Dividends from ELSS investments are taxable at 11.65%. You can also choose to grow the option, and continue reinvesting your money until you redeem the scheme or make profits.

The Benefits of ELSS Fonds

  1. You can withdraw 100% of your funds after the three-year lock-in period has expired.
  2. All investors have access to the ELSS investment portfolio.
  3. You can choose to invest in lump sums or as an SIP.
  4. ELSS funds can be a great way for you to grow your money because the returns they produce are comparatively better than other schemes.
  5. ELSS investments are managed by a skilled fund manager. This scheme is great for investors new to the market who might need assistance in choosing the best options.
  6. Only Rs. 1.5 lakhs per annum, but you have the option to invest more if you are happy with the scheme and confident about getting good returns.

Let’s now look at the flip side. This will provide a comprehensive overview of the benefits and drawbacks of ELSS, which can help you save taxes on mutual funds.

This investment is equity-linked so it’s better suited for investors who are more open to risk. Conservatives can choose FDs or PPF.

After the three-year lock in period, any money received is taxable under capital gain tax.

Returns are not guaranteed as with all mutual funds. This can be frustrating for conservative investors.


ELSS funds can be used to save taxes on mutual funds. Their lock-in period is only three years. If you are interested in investing in equity-linked schemes, consider ELSS if you want to save tax and grow your wealth.