ELSS Mutual Fund

Equity Linked Saving Scheme is a mutual fund in which you invest a significant portion allocated to stocks or equities. It's a top tax-saving option in India, offering to Rs. 150,000 tax exemption annually under Section 80C of the Income Tax Act.

ELSS funds aim to grow investments in stocks while providing tax advantages. Notably, each SIP in this scheme has a mandatory lock-in period of 3 years.

Read further to know more about why ELSS Mutual Funds schemes can be the right option for investment for you. Before proceeding, go through the key charges associated with the scheme outlined below:

Potential Returns 15% - 18% p.a.
Minimum Investment ₹500
Maximum Investment No limit
Lock-in Period 3 years
Taxabilty Save up to Rs 46,800 p.a. tax rebate under Sec 80C
Well suited for Short-term investors looking for high returns

Feature of ELSS Mutual Funds

Apart from providing tax deductions under Section 80C, ELSS funds offer distinctive features that make ELSS funds stand out. Here are some of the major features of ELSS Mutual Funds that help you know more about tax-saving opportunities with high growth potential:

Shortest Lock-in-

The shortest lock in period
of 3 years

2x Returns

Get 2x returns on FD/PPF

Start small,
invest smarter!

Invest as low as ₹100
every month

Go Paperless

Enjoy hassle-free &
paperless investment


Your Data is securely

1-click Withdrawal

Effortless withdrawal in
just 1 click

Who Should Invest in ELSS Mutual Funds

ELSS funds are ideal for several categories of investors.These funds primarily suit risk-taking investors who are comfortable with market fluctuations and are eyeing potentially higher returns. Also, young professionals in the early stages of their careers find ELSS attractive because of the combined benefits of tax savings and long-term capital appreciation.

Experienced investors often use ELSS funds to diversify their portfolios and capitalize on equity for long-term wealth growth. However, it is always suggested for investors to consider a minimum investment horizon of five years to maximize the potential ELSS mutual fund return. ELSS is particularly well-suited for these individuals as it allows them to leverage the benefits of compounding. With ample time on their side,investors can capitalize on the potential for high returns while simultaneously benefiting from tax savings of up to Rs 46,800 per year.

How To Invest in ELSS Funds

Now that you clearly understand ELSS Funds and if you are considering investing, here are the ways you can invest in ELSS mutual Funds:

Step 1: Select an ELSS fund based on your financial goals, risk tolerance, and performance analysis.

Step 2: Complete your KYC (Know Your Customer) process by submitting necessary documents like PAN card, Aadhaar, etc., either online or offline.

Step 3: Decide on the investment mode. Through a Systematic Investment Plan you can have more regularity and reduce the risk to capital.

Step 4: Allocate funds based on your investment strategy among the different available ELSS funds.

Step 5: Utilize online platforms or consult with financial advisors for guidance and investment decisions.

Step 6: Fill out the application form, mentioning the investment amount, mode, and other relevant details.

Step 7: Keep track of your investments, review their performance periodically, and adjust if necessary.

What are the Tax Benefits offered by ELSS Mutual Funds?

ELSS mutual funds offer tax deductions of up to Rs 1,50,000 per year under Section 80C of the Income Tax Act, 1961, allowing you to save up to Rs 46,800 annually in taxes.

However, please note your investments are locked in for three years from the investment date.

Factors to Consider Before Investing in ELSS Funds

Before diving into ELSS (Equity Linked Savings Scheme) investments, several crucial factors warrant careful consideration. Here are the few important aspects that can significantly influence your investment decisions:

  • Risk Appetite: Evaluate your risk tolerance as ELSS funds involve market risks because of their equity exposure.
  • Investment Horizon: Determine your investment duration; ELSS funds have a lock-in period of three years.
  • Performance Track Record: Research the historical performance of the fund and its consistency over different market cycles.
  • Expense Ratio: Assess the fund's expense ratio, as lower expenses can impact your returns positively.
  • Fund Manager Expertise: Analyze the expertise and experience of the fund manager managing the ELSS scheme.
  • Tax Planning Needs: Evaluate whether tax-saving is your primary goal and if ELSS aligns with your tax planning objectives.
  • Diversification: Assess how ELSS fits into your overall investment portfolio to ensure diversification.
  • Exit Load: Understand the exit load structure, which applies if you redeem units before the lock-in period.

However, carefully considering these factors can help you make a more informed decision when investing in ELSS funds.

How to Redeem ELSS Mutual Funds

Redeeming ELSS Mutual Funds follows a systematic procedure. After the lock-in period of three years of investment, you can redeem your ELSS units. Here are the steps to redeem ELSS mutual funds:

  1. Login to the Mutual Fund Website or Investment Platform: Access the online portal of the respective mutual fund house or investment platform where you hold your ELSS fund units.
  2. Select 'Redeem' or 'Sell' Option: Choose the 'Redeem' or 'Sell' option for the ELSS mutual fund you wish to liquidate.
  3. Enter Redemption Details: Confirm the transaction by providing necessary details such as folio number, account information, via OTP or PIN.
  4. Review and Confirm: Review the transaction details thoroughly. Confirm the redemption request.
  5. Processing Time: After confirming, the redemption amount will be credited to your registered bank account.

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Frequently Asked Questions

An Equity Linked Saving Scheme (ELSS) is a type of mutual fund that primarily invests in equity and equity-related instruments. It offers tax benefits under Section 80C of the Income Tax Act, making it a popular investment avenue for tax-saving purposes.

ELSS funds function by pooling money from multiple investors to invest primarily in equity and equity-related securities. They have a lock-in period of three years, during which investors cannot redeem or withdraw their investment.

Investments made in ELSS funds are eligible for tax deductions of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Long-term capital gains up to ₹1 lakh are tax exempt, making them tax-efficient investment options.

No, only the invested amount up to ₹1.5 lakh in a financial year is eligible for tax deductions under Section 80C.

Yes, ELSS funds offer the option of investing through SIPs, allowing investors to make periodic investments in a disciplined manner.

ELSS funds offer both growth and dividend options. Investors can choose between receiving dividends or reinvesting them in the fund.

Yes, investors can switch between different ELSS funds offered by the same mutual fund company, subject to the fund's terms and conditions.

After the completion of the three-year lock-in period, investors can redeem their ELSS units. The redemption process involves submitting a redemption request to the fund house or through an online platform.

ELSS funds can be a part of retirement planning due to their potential for long-term wealth creation. However, they should be considered along with other retirement-specific investment options.

Before investing in ELSS funds, consider factors such as your investment goals, risk tolerance, investment horizon, fund performance, expense ratio, and the fund manager's track record to make an informed investment decision.

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