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Aditya Birla Capital LimitedAditya Birla Capital Limited (“ABCL”) is a listed systemically important non-deposit taking Non-Banking Financial Company (NBFC) and the holding company of the financial services businesses. ABCL and its subsidiaries/JVs provides a comprehensive suite of financial solutions across Loans, Investments, Insurance, and Payments to serve the diverse needs of customers across their lifecycles. Powered by over 61,600 employees, the businesses of ABCL have a nationwide reach with over 1,690 branches and more than 200,000 agents/channel partners along with several bank partners.
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INR 1.65 Lakh CrABCL
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What is an ELSS Mutual Fund??
Short for Equity-Linked Saving Schemes, ELSS mutual funds are open-ended equity funds which qualify for deduction under Section 80C up to Rs.1.5 lakhs and come with a lock-in period of 3 years.
Advantages of ELSS Mutual Funds
Tax saving
The amount invested is allowed as a tax deduction under Section 80C up to Rs.1.5 lakhs. You can save up to Rs.45,000 in taxes if you are in the 30% tax bracket.
Long-term growth
With a lock-in period of 3 years, you can stay invested in the equity market and get good returns on investments, tiding over short-term volatility.
Professional fund management
ELSS mutual funds are actively managed schemes wherein the fund managers try to mitigate risks and enhance returns.
Equity Exposure for Tax Benefits
ELSS funds mandate a significant portion of investment in equities, providing investors with exposure to the potential for higher returns that this asset class offers, alongside the tax-saving benefit.
Explore ELSS Mutual Funds
Most Popular
AUM: 23427(Cr)
Risk: Very High
- MIN. INVESTMENT 500
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹10000
- Get (30 Yrs) ₹24,850*
*Projections/estimations is backtested using historical data.
Most Popular
- AUM: 23427(Cr)
- Risk: High
- MIN. INVESTMENT 1000
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹15000
- Get (30 Yrs) ₹34,850*
*Projections/estimations is backtested using historical data.
ELSS Mutual Funds Returns Calculator
REGULAR INVESTMENT
SIP
Invest systematically in regular amounts and build a corpus with a disciplined investing habit.
ONE TIME INVESTMENT
Lump sum
Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
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Understanding ELSS Mutual Funds
Table of Contents
What are ELSS mutual funds?
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ELSS mutual funds are equity-oriented schemes with an added tax benefit. They invest a minimum of 80% of their portfolio in equity and equity-related securities and have a lock-in period of 3 years from the investment date.
What are the features of ELSS mutual funds?
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Investment made is eligible for deduction under Section 80C up to ₹1.5 lakhs
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There’s a lock-in period of 3 years
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Being equity funds , there’s a high volatility risks which stabilises with the lock-in period
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Suitable for investors with a long-term investment horizon and a high risk appetite
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Invest through SIPs or lump sum
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Earn tax-free returns up to ₹1 lakh
Things to keep in mind when investing in ELSS mutual funds
Premature withdrawals, during the lock-in period are not available
Each SIP will be locked in for 3 years
Tax deduction under Section 80C is available only under the old tax regime
The minimum investment amount can start from as low as ₹100 if you choose the SIP investment mode
What should be the investment horizon for ELSS mutual funds?
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ELSS funds have a lock-in period of 3 years
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As such, you need an investment horizon of 3+ years
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A long-term investment horizon also helps stabilise short-term volatility risks
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You can get good capital appreciation if you invest with a horizon of 5 years and above
What is the tax implication of ELSS mutual funds?
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Returns up to ₹1 lakh are tax-free
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Returns exceeding ₹1 lakh are taxed at 10%
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Dividends earned, if any, are taxed at your income tax slab rate
What are the payout options?
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Dividend option
Earn dividends on your investment at regular intervals
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Growth option
Accumulate the returns over the investment tenure and get a lump sum amount on redemption
FAQs On ELSS Mutual Funds
No, ELSS funds are equity-oriented funds and hence carry some risk.
Compare the past performance of ELSS funds. A fund offering consistent returns over the past would be the right choice.
It is not possible to redeem ELSS funds before the lock-in period of 3 years ends. You can consider other emergency options such as loans, credit, withdrawing other investments, etc.
Besides ELSS funds, no other mutual fund schemes offer tax benefit under Section 80C.
ELSS funds have diverse portfolios. They invest mostly in publicly traded stocks across market capitalisations (large-cap, mid-cap, and small-cap) and sectors.
The main disadvantage of ELSS funds is the limited liquidity due to the initial 3-year lock-in period. Besides, there are risks associated with ELSS funds being equity-oriented. However, advantages such as tax-saving and the potential of appreciative returns helps them remain a popular investment choice.
The ideal investment horizon for ELSS is 3+ years. So you can choose ELSS funds to save up for buying the car while saving taxes too.
As for SIP, each instalment is treated as one unit of investment when it comes to the lock-in period. Hence, you can withdraw only the number of SIP units/instalments that have remained invested for 3 years at any point.
There are numerous ways to save tax under Section 80C of the Income Tax Act. If your risk appetite and financial goals are aligned with ELSS funds, you may consider them for tax-saving. They offer wealth creation through equity exposure and also tax benefits under Section 80C.
Yes, if you select the dividend payout option and the fund declares dividends at any point, you can earn dividend income from your ELSS fund.
Investors Who Want to Save through Tax - ELSS funds, with their tax benefits under Section 80C, are a good option for taxpayers ready for the risks of equity.
Long Term Investors - ELSS funds have a 3-year lock-in period, plus they tend to perform better the longer you hold them. They are well-suited to long term financial goals.
Investors without the risk appetite for equity and with a short investment horizon are not recommended to invest in ELSS funds.
ELSS funds themselves are a type of mutual funds that invest majorly in equity. The main difference between ELSS and other equity mutual funds is that ELSS funds have a lock-in period and come with tax benefits. Hence, they are better for tax-saving goals. Otherwise, which fund is better for an investor really depends on their individual goals.
The tax benefits of ELSS funds apply throughout the lock-in period i.e. 3 years.
ELSS funds invest at least 60% of their holdings in equity instruments.
You can pick either way to invest in an ELSS fund as per your convenience and financial capacity.
ELSS funds are, in fact, a type of equity mutual fund. The only difference between ELSS funds and other equity funds is that ELSS funds have a lock-in period and they carry tax benefits.
ELSS funds have delivered around 19.62% p.a. returns on an average.
Lock-in period - It is not possible to withdraw your ELSS investment before the lock-in period of 3 years is over. So, you need to keep in mind that for the first 3 years, your ELSS fund will not be liquid.
Investment horizon - To beat market volatility, you ideally need to stay invested in your ELSS fund for 5+ years. Hence, you should invest in them for long-term goals.
Returns - ELSS funds carry a significant risk as they do not provide guaranteed returns. The returns depend on the performance of underlying securities. Hence, a good risk appetite and a longer investment horizon is needed to try and tide over the uncertainties.
ELSS funds are better for tax-saving goals and a larger risk appetite. Meanwhile, NPS investments are better for investors with a lower risk appetite and a longer investment horizon than ELSS funds.
You simply need to check for the fund details on your fund house’s website, where all the features of the fund will be listed in detail.
It is possible to switch your ELSS from one fund house to another only after the lock-in period of 3 years is over, since switching requires withdrawal and reinvestment.
Types of Equity Funds
Funds Based On Market Capitalisation
Funds Based On Investment Style
Other Asset Class Funds
ETF Funds
Invest in funds listed and traded on the stock exchange
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Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
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Hybrid Funds
Get a mix of equity, debt and other asset classes for a diversified portfolio
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Index Fund
Passively-managed mutual funds tracking a particular index
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