ELSS

Equity Linked Savings Scheme (ELSS) invests a major portion of its corpus into equities and equity-related instruments. This includes listed shares and fixed-income securities. The asset allocation is mostly 65% of the portfolio. This is as per SEBI regulations. ELSS mutual funds have a compulsory lock-in period of three years which is the shortest among all tax savings funds. There are no provisions for premature exit.

 

As the name suggests, ELSS is linked to the equity markets. There are tax benefits that make it quite a popular choice in India. But the income you earn at the end of 3 years is known as Long Term Capital Gain (LTCG) and is taxed at just 10%. This rule is applicable if the income is more than ₹1 lakh. If you wish to consider ELSS, here’s a look at what to know.

Key Benefits of ELSS

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Tax Efficient Returns
You can enjoy tax deductions under Section 80C of the tax act.

Flexibility
You are able to choose between SIP and lump sum as per your financial situation and choices. This makes it quite convenient for all types of investors.

Wheel Effect
Investors are allowed to re-invest in an ELSS fund after 3 years-maturity. This can help you receive additional tax benefits without a fresh investment.

Expert Management
Highly experienced professionals will help you invest and manage the ELSS funds. This is done based on market research and individual preferences. They work in your interest rather than with a profit mindset.

Did you know? Investments in ELSS can give you higher returns like equity while saving tax too

Reckoner

Check out the top performing ELSS Schemes with our Ready Reckoner.

Script Name Value Research Rating Nav 1 Year
Return 		3 Year
Return 		5 Year
Return 		Risk
SBI Magnum COMMA Fund
35.67 35.67% 35.67% 35.67% Moderately High Purchase
Birla Sun Life Equity Fund
35.67 35.67% 35.67% 35.67% High Purchase
SBI Magnum COMMA Fund
35.67 35.67% 35.67% 35.67% Moderately High Purchase
Birla Sun Life Equity Fund
35.67 35.67% 35.67% 35.67% High Purchase

Tax Benefits of Equity Linked Savings Schemes (ELSS)

Compare the tax benefits you stand to gain under different income brackets by investing in Equity Linked Savings Schemes (ELSS).

Your Taxable

Income

Amount invested in ELSS under section 80C

Tax before ELSS

investment

Tax after ELSS investmentTotal Savings*Tax Slab
5,00,000 1,50,000  12,500  5,000 7,725 5% of Income exceeding Rs. 2,50,000 and up to 5,00,000
8,00,000 1,50,000  72,500  42,500 30,900 20% of Income exceeding Rs. 5,00,000 and up to 10,00,000
12,00,000 1,50,000  1,72,500  1,27,500  46,350 30% of Income exceeding Rs. 10,00,000
15,00,000 1,50,000  2,62,500  2,17,500  46,350 30% of Income exceeding Rs. 10,00,000

*Education cess of 2% and Higher education cess of 1% is included

MF Return Calculator

Estimate your potential returns from a particular mutual fund based on SIP or lump sum investments made over your preferred time period in ELSS funds.


If I had made
investment of  
in
Months Ago
My investment would be worth 1,54,357.94 with a Gain of 55.29%

Rs. 1 Lac Invested would be worth
Fund Name 1 year
Mirae Asset NYSE FANG+ ETF 154,357.94
55.29%
NIFTY 110,009.40
10.16%
SENSEX 109,398.78
9.54%
FD 0.00
9%
Did you know Mirae Asset NYSE FANG+ ETF has outperform Fixed Deposit , Gold & PPF in last 1 years.
Start SIP

Educational Video

19-09-2018;
Saving tax with Mutual Fund - ELSS
Wondering how to save tax and generate wealth through equity schemes? Here’s a Mutual Fund category which will help you save tax through your locked-in investment. Watch the video to understand how.

Learn More

Visit our blog centre to learn more about Equity Linked Savings Scheme and to make informed investment decisions. 

Features of an ELSS Fund

There are certain risks linked to equity funds like liquidity risk and market risk. However, a good ELSS can generate 10-12% in the long run which is worth taking a chance for. It offers the twin benefits of ELSS tax savings and wealth creation.

 Here are the top features:

  1. The fund invested is in a well-diversified manner across multiple themes, sectors and market capitalizations. They also consider many companies ranging from small-cap to large-cap.
  2. There is no upper capping on the amount you can invest in the ELSS. Neither is the investment tenure limited. But the minimum amount usually varies from one fund house to another. You can start with as low as ₹500.
  3. ELSS is the only mutual fund scheme that is able to offer inflation-beating returns,
  4. Most investors prefer the systematic investment plans (SIP) method instead of the lump sum. This way you can invest small yet accumulate sufficient wealth.

Make sure to analyse the scheme’s performance over the last 10 years at least. Also, try staying invested for at least 5-7 years to stabilise despite the lock-in period. ELSS is inherently volatile, and a short-term investment horizon is good to avoid.

 

Factors to Consider Before Investing in ELSS

Choosing the right equity fund might boost investment and help you see great gains. Below are a few parameters that will tell a good ELSS from a bad one. Read on.

Investment Horizon: Make sure the tenure is at least more than 5 years. Equity exposure of ELSS funds requires a longer horizon to be able to mitigate market volatility.

Lock-in Period: You are not allowed to redeem your holdings for the next 3 years. So, make your financial planning knowing that you can only sell your investment after this period.

Risk Appetite: Pick an ELSS only if you have an aggressive or moderate risk profile. This is because any investment in the equity market comes with high risks. You may choose a multi-cap approach or mid/small cap biases if you have a high appetite.

 

Is ELSS Fund Good for You?

ELSS is the best option for salaried individuals who wish to balance risk and return on their investment portfolio. While ULIPs and NPS have a high lock-in period and less return potential ELSS has a mandate period of 3 years only which has significant returns. This makes it ideal for the fixed-income group.

First-time investors can consider ELSS for a number of reasons.

  • The risk is minimised if you invest for less than 5 years.
  • Great tax savings under 80C of the Income Tax Act.
  • Managed by fund managers with great expertise and knowledge.

 

They also get introduced to equities and what it is like to invest in mutual funds.

FAQs

Why invest in ELSS?
It comes with excellent tax saving potentials than traditional tools like NPS and FDs. The lock-in period is also short which makes it more attractive.

 

What to know before investing in ELSS?
Keep in mind that the market risks associated with the portfolio differ across funds. Yet it is able to reap the rewards of a high market.

 

Is ELSS dependent on market moves?
Yes, the success of ELSS mutual funds is determined by market fluctuations. Work with a fund that has shown a consistent track record over the years.

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