ELSS Tax Savings Scheme: A Smart Way to Save Tax and Grow Wealth

Are you on the lookout for a tax-saving solution that can simultaneously help you achieve long-term financial goals? Look no further than the ELSS or Equity Linked Savings Scheme. ELSS is a unique mutual fund that provides tax benefits under the Sect 80C of the Income Tax Act, 1961. By investing in ELSS, you can claim a tax deduction of up to Rs 1.5 lakh per year, potentially saving you up to Rs 46,800 in taxes. What sets ELSS apart is its potential to yield higher returns compared to other tax-saving options like PPF, NSC, and FD.

What is ELSS?

ELSS is a mutual fund scheme that invests a minimum of 65% of its assets in equity and the equity-related securities. It is the sole mutual fund scheme that qualifies for tax deductions under Section 80C. You have the flexibility to invest in ELSS through either a lump sum or a systematic investment plan (SIP). The SIP approach allows you to invest a fixed amount every month, harnessing the power of compounding and rupee cost averaging.

One of ELSS’s key features is its three-year lock-in period. During this time, you cannot withdraw your investment. However, this lock-in period is notably shorter than other tax-saving options under Section 80C. For instance, PPF has a lock-in period of 15 years, NSC has a lock-in period of 5 years, and FD has a lock-in period of 5 years.

What are the Benefits of ELSS?

ELSS offers several advantages to investors:

  1. Tax Saving: Investing in ELSS under Section 80C allows you to claim a tax deduction of up to Rs 1.5 lakh per year. Depending on your income tax slab, this can save you up to Rs 46,800 in taxes.
  2. Wealth Creation: ELSS invests in equity and equity-related securities that have the potential to provide higher returns over the long term as compared to fixed-income instruments. Equities are known for outperforming inflation and generating wealth for investors.
  3. Diversification: ELSS invests in a diversified portfolio of stocks across various sectors, industries, and market capitalisations. This minimises the risk of concentration and enables you to tap into growth opportunities across the economy.
  4. Flexibility: You can invest in ELSS as a lump sum or through SIP, tailored to your convenience and affordability. You can also select from different ELSS schemes based on your risk-taking ability and return expectations. After completing the lock-in period, you can switch from one ELSS scheme to another without any tax implications.
  5. Discipline: ELSS promotes a habit of consistent and disciplined investing through SIP. SIP enables you to invest a fixed amount every month, regardless of market conditions, helping you avoid timing the market and spread out your purchase cost over time.

Tax Benefits of ELSS Funds

Not only do ELSS funds provide an opportunity for investment in the equity markets, but they also offer tax benefits to investors. As per the Indian Income Tax Act, an individual can claim a tax exemption of up to Rs 1.5 Lakhs from their taxable income by investing in these mutual funds under Section 80C. This makes ELSS funds a great option for those looking to save on taxes while also investing in the equity markets.

How to Invest in ELSS?

You can invest in ELSS through online or offline channels, with online being the more convenient and hassle-free option. Online zero brokerage trading platforms provide the flexibility to invest from anywhere using your smartphone or laptop. Additionally, you can compare various ELSS schemes and select the one that suits your requirements. 


ELSS stands out as a smart means to save taxes and foster wealth over the long term. It offers tax benefits under Section 80C, the potential for higher returns compared to other tax-saving options, diversification, flexibility, and a disciplined approach to investing. When considering an ELSS investment, take into account your risk profile, investment horizon, and the long-term financial goals. 



Equity Linked Savings Scheme (ELSS) is a type of mutual fund in India that helps investors to save on their taxes while also providing them with an opportunity to invest in the equity markets.