Equity Linked Savings Schemes

ELSS funds score over their traditional counterparts in terms of the superior tax efficiency of their returns, their comparatively shorter lock-in period, and their better odds of helping you create long-term wealth. Any profits that are booked when you redeem your ELSS fund units will be counted as long-term capital gains from equity funds, and will therefore not be taxed.


Shortest Lock-in Period

3 Years

Wealth Creation Potential

22.64% p.a

Convenience of SIP'S

Put your tax savings on auto pilot

Tax Efficiency

Profits Earned are
Tax-Free

Lock-in Returns Taxability Risk
Life Insurance (Non-linked) 5 - 20 years 3.5% - 7.5% NIL LOW
NSC 5 - 10 years 7.8% Taxable LOW
PPF 15 years 7.8% NIL LOW
5 Year Fixed Deposit 5 years ~6.5% Taxable LOW
ELSS 3 years 12% - 14% (non-guaranteed) NIL HIGH

ELSS FAQs


ELSS FAQ’s

How do ELSS Funds help you save taxes?

Investments made into ELSS Funds in a given Financial Year are deductible from your taxable income for the year, under Section 80C of the income tax act. Section 80C currently has a limit of Rs. 1 5 lakhs per fiscal, and a number of other instruments (NSC, PPF, Life Insurance Premium, Home Loan Principal, etc) also qualify, so please speak with your Financial Advisor to properly plan your investment amount for a given fiscal year.

Are ELSS Funds risky?

As the name suggests, ELSS funds invest into equities, which are a fundamentally volatile asset class. Hence, your ELSS fund value could fluctuate heavily in the short term. However, by maintaining a long-term horizon, and by investing through SIP’s instead of deploying lump sums at the end of the year, it is possible to greatly reduce the risk associated with investing into ELSS funds.

Do ELSS Funds provide a guaranteed return?

No. ELSS funds do not provide guaranteed returns, as they invest into equity shares of companies. However, it’s worth noting that in the long run, equities have consistently outperformed other fixed income asset classes, albeit with higher volatility. If you’re young and have age on your side, you shouldn’t chase guaranteed returns from your investments – you’re better off harnessing the power of equities instead.

What is the investment limit for ELSS?

You can start your investment in an ELSS with an amount as low as Rs. 500/month, and there is no upper limit to how much you can invest. However, your tax deduction from your ELSS investment is capped at Rs. 1.5 Lakhs, assuming you’ve made no other tax-saving investments for the year under Section 80C.

How long should you stay invested into ELSS Funds?

Though the mandated lock-in period for ELSS Funds is 3 years, it is strongly recommended that you invest into them with a minimum time-horizon of 5-7 years. If your 3-year lock in finishes amidst the throes of a bear market, you may have to end up booking a loss. In such a scenario, extending your time horizon can help recoup losses and earn returns, as equity markets are cyclical in nature.

Can I withdraw from my ELSS fund before 3 years are complete?

ELSS Funds enforce a hard lock in, and so you cannot redeem from them before the mandated 3-year lock in period is complete. You can, however, generate interim liquidity from them (if required) vy selecting the “Dividend Payout” option while making an investment. Dividends from ELSS Funds, paid out at the discretion of the Fund Manager, as tax free in nature.

Quick Enquiry
Powered By: Trudawn Solutions