What is ELSS funds and how to invest?

What is ELSS funds and how to invest?

ELSS or Equity Linked Savings Schemes are mutual fund investment schemes that offer secure savings with tax benefits. That is the reason why the ELSS funds are known as tax saving funds. Under the act of 80C of the income tax act, tax payers can save up to 1.5 lakh.

List of ELSS Funds in India

The below lsit of best ELSS Fund based on the returs of last three years

Canara Robeco Equity Tax Saver20.01%12.3% - ₹1216.95
Axis Long Term Equity Fund14.62%12.15% - ₹22631.51
Mirae Asset Tax Saver Fund16.64%10.99% - ₹4462.58
Quant Tax Plan Fund30.73%10.94% - ₹18.80
BOI AXA Tax Advantage Fund26.51%8.99% - ₹318.52

Note: Before investing, subscribers should consider financial goals, risk tolerance, investment horizon. Make a good investment plan and then go ahead.

Features of Equity Linked Savings Scheme (ELSS)

Equity Linked Savings Scheme is one of the greatest investment options, this scheme not only gives security also offers good returns with good tax savings. This scheme does not have any age limit. So one can start savings once they start earning.

Key Features of ELSS

  • Offers Tax-benefits up to Rs 1.5 lakh under section 80C of the income tax act.
  • ELSS offers two investment options (Dividend or growth options).
  • ELSS comes with a lock period of 3 years.
  • The performance of the ELSS is completely based on the performance of the market.


  • Select the best tax saving mutual fund:
  • Invest in the best mutual fund that benefits you.

Choosing between Regular and Direct Plans of Tax Savings Mutual Funds Schemes

Every fund has two plans with different NAV.

Regular Plan

Regular plans are traditional Plans and charges higher expense ratio every year.

Direct Plan

Direct plans on the other hand has low expense ratio, as there is no distributor involved. They provide better returns.

Selection of Intermediary

Go to the intermediaries who help you invest in ELLS. This is not mandatory, sometimes you can also go directly to invest in ELLS funds.

Lump-Sum Investment or SIP in ELSS Mutual Funds

  • SIP is the best way of investment in ELSS
  • SIP offers help you reach the target faster and quicker.
  • Getting your money back after 3 years:
  • Subscriber has to fill a form for redemption after 3 years after that money will be credited to your account.

Follows the following steps to invest in the ELLS fund to enjoy the benefits.

Steps to invest in ELSS:

Step 1Select the tax saving scheme that suits you.The Shcem basically depends on the returns that offers.
Step 2Select between an option of regular mutual funds, or tax saving mutual fund schemesELSS mutual fund has 2 plans - Regular & Tax Savings.
Step 3Proceed and open a bank accountIt is the important step as the dividends will have to be credited in the bank account under your name.
Step 4Pick your intermediaryMotual funds do not charge any commision for any service ifact the companies offer deals when they get new client.
Step 5Mutual fund distributorMutual fund distributor invest behaf of the subscriber that suits the subscriber (Just like the caution). Select the ELSS that benefits you not the distributor.
Step 6Online DistributorGO to the online distributor, to invest in ELSS online and selct the option that gets best returns.

How does ELSS compare with other Tax Saving instruments?

Name of InstrumentLock In periodReturns and Tax on Returns
ELSS3 Years10-12% - LTCG Tax
Tax-Saving FD5 years6-7% - Income Tax
National Saving Certificate (NSC)5 years7-8% - Income Tax
Public Provident Fund (PPF)15 years7-8% - No
National Pension System (NPS)Up to age 608-10% - Partially Taxable

Advantages of ELSS

  • Tax benefits
  • Secure Savings
  • Offers higher returns
  • Gives the option of dividends and growth
  • No limit


  • There will be a lot of documentation procedure to be followed
  • Returns depend on market performance, if the market performance is low the returns will also below.
  • There is no premature withdrawal.
  • NRIs are not allowed to save in this scheme.

Where to Open an ELSS Account

Many nationalized private banks offer this option to open the ELSS account. Also one can open the ELSS account in SBI. Subscriber has to discuss with the banker that you wish to open the ELSS account and after the approval, the subscriber can go-ahead to open the ELSS account to enjoy the benefits.