ELSS Mutual Funds/Tax saving Mutual Funds



ELSS Mutual Funds (Equity Linked Savings Scheme) is a diversified tax saving mutual funds that invests primarily in equity and equity related instruments. They come with a lock-in period of three years and provide investors the dual perks of the tax exemption under Section 80C of the Income Tax Act and capital appreciation.

Benefits of investing in ELSS Mutual Funds

  • Under Section 80C, the top elss funds enables investments that are eligible for tax benefit up to 1.5 lakh.
  • Presently, there is no long-term capital gains tax applicable on ELSS but starting April 1st, 2018, investors have to pay a 10% long-term capital gains tax on gains excess of Rs. 1 lakh in a financial year.
  • Apart from tax exemption and capital gain, ELSS has an added advantage of having the shortest lock-in period of three years in comparison to other tax saving instruments.
  • You can opt for SIP(Systematic Investment Plan) and make disciplined investments in ELSS starting with Rs. 500 per month

ELSS mutual funds in comparison to other tax saving mutual funds instruments like NSC and PPF

The below table is a comparative representation of the three investment strategies-ELSS, NSC and PPF:

Particulars ELSS NSC PPF
Minimum lock-in period 3 years 5 years 15 years
Taxation of interest or dividend Presently, dividend is not taxed but starting April 1st, 2018, dividend from ELSS will be subject to dividend distribution tax at 10% Interest earned on NSC is taxable under “Income from other sources” but since the interest is gain reinvested in NSC, it becomes eligible for deduction u/s 80C Tax free
Taxation at the time of redemption Presently, LTCG on redemption of ELSS is not taxable in the hands of investors but starting April 1st, 2018, it will be taxed at 10% on the gains in excess of Rs. 1 lakhs in a financial year. Tax free Tax free
Returns They have delivered average returns in excess of 15% over the past few years 7.6% compounded annually 7.8%
Minimum investment Rs. 500 Rs. 100 Rs. 500
Maximum investment No limit No limit Rs. 1,50,000
Risk High Low Low

The bottom line:

ELSS mutual funds is an equity-based investment option and therefore, are subjected to market fluctutions but is more profitable than the other two options in the long term. They can help you earn an inflation beating returns of 14% to 16% if invested for a longer period. Hence, top ELSS funds is an lucrative investment option.

Budget 2018 –the effect on ELSS Mutual Funds


The recent budget announcement has posed a major mayhem on individuals who opt the ELSS strategy of investment.The Finance Minister has announced a 10% Long Term Capital Gain(LTCG) tax on the equity and other related tax saving mutual funds post January 31st, 2018. But this LTCG tax is only for gains above 1 lakh in a financial year, therefore,  the new investors need not be perplexed.


On the whole, ELSS mutual funds is still the best vehicle to hop on to fulfill your long-term financial vision. “Start early-invest less and earn more” is the mantra to be followed.

To know more about the Mutual Funds, Visit: wealthapp.com and start investing now!