ELSS Mutual Funds: Tax-Saving Investment Under Section 80C

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.

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.

INVEST AMOUNT

PERIOD

RETURNS

Total Amount Invested

₹ 0

after 30 years you will get a return of

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Disclaimer: Projections/estimations is backtested using historical data.

TARGETED RETURN VALUE

INVESTMENT PERIOD

RETURNS

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?What are the features of ELSS mutual funds?Things to keep in mind when investing in ELSS mutual funds What should be the investment horizon for ELSS mutual funds?What is the tax implication of ELSS mutual funds?What are the payout options?

What are ELSS mutual funds?

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?

Investment made is eligible for deduction under Section 80C up to ₹1.5 lakhs
There’s a lock-in period of 3 years
Being equity funds , there’s a high volatility risks which stabilises with the lock-in period
Suitable for investors with a long-term investment horizon and a high risk appetite
Invest through SIPs or lump sum
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?

ELSS funds have a lock-in period of 3 years
As such, you need an investment horizon of 3+ years
A long-term investment horizon also helps stabilise short-term volatility risks
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?

Returns up to ₹1 lakh are tax-free
Returns exceeding ₹1 lakh are taxed at 10%
Dividends earned, if any, are taxed at your income tax slab rate

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
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.

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ELSS Mutual Funds