ELSS Best option for Tax saving plus Investment?

Equity-linked saving schemes (ELSS) is a type of diversified equity mutual fund (MF), which is qualified for tax exemption under section 80C of the Income Tax Act. By investing in it, investor gets a Double-advantage of capital appreciation and tax benefits. It has a lock-in period of three years. Investments of only upto Rs 1,50,000 per financial year can be claimed as deductions.


The unique selling proposition of ELSS is they have delivered up to 20 per cent returns . which is higher in compare to any other tax saving investment.

Lock-in period of ELSS is three years which is shortest lock-in period compare to any other tax saving investment.

ELSS funds follow the EEE mode, where in investment, capital gains and maturity amount are tax-free. This is because you are locked in for three years, resulting in long-term capital gains, which invite zero taxation for equity investment.

Is ELSS is suitable for me ?

It is suitable to all types of investor who are not risk averse (dislike risk taking) and need to invest in tax planning instruments. There is no age to get started in an ELSS.

How I can claim tax benefits?

In order to claim the tax benefits of ELSS funds, under section 8oC, give a copy of your account statement or ELSS Funds Allotment details to your finance/HR team as a proof of your investment . If you miss to submit details to HR team you can claim it at time of Filing Income Tax Return.

Can I hold my ELSS funds after lock-in of 3 years?

Yes. Financial planners recommend they consider ELSS as a part of their equity allocation and hold it to meet their financial goals and after lock-in period of 3 years is our you can treat ELSSS fund as normal mutual fund.

How much should I invest in ELSS ?

My recommendations is based on income brackets

  • if income is 3 to 5 lac then ideal investment is Rs. 30,000 ( Tax Saved 3,000* , Profit eared per year 4,500*)
  • if income is 5 to 10 lac then ideal investment is Rs. 50,000( Tax Saved 10,000* , Profit eared per year 7,500*)
  • if income is above 10 lac then ideal investment is Rs 1,00,000( Tax Saved 15,000* , Profit eared per year 15,000*)

Best way to invest in ELSS?

Lets not put all our eggs in one basket. Invest you money in different funds in divided from and also do not buy too many different funds because it is difficult to keep track. There are to method to invest in ELSS lump sums and systematic investment plans (SIPs). It makes most sense to pick a well-managed fund, which has a 5–10-year track record of performance, and a proficient fund manager and also check fund portfolio to find out in which sector fund is investing so you can figure out fund performance. you can check fund portfolio on money and performance on money control website.you can also take expert advise.