ELSS Mutual Funds – Tax Saving Mutual Funds

ELSS Funds or ELSS Mutual Funds are diversified tax saving mutual funds that invest predominantly in equity and related instruments.

They come with a lock-in period of three years and also provide investors dual perks of the tax exemption under Section 80C of the IncomeTax Act and capital appreciation.

Best ELSS Mutual Funds

Benefits of investing in best ELSS Mutual Funds  (Equity Linked Savings Scheme)

  • Under Section 80C, the best elss funds enable investments that are eligible for tax benefit up to 1.5 lakh.
  • From 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, this scheme has an added advantage of having the shortest lock-in period of three years in comparison to other tax saving instruments.
  • You can also opt for Systematic Investment Plan – SIP, and make disciplined investments in ELSS starting with Rs. 500 per month.
  • There are other options for investing in best elss funds. These are growth options, dividend options, dividend reinvestments options.

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 Equity Linked Savings Scheme 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 funds are equity-based investment option are subjected to market fluctuations but are 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, ELSS funds are an lucrative investment option.

Budget 2018 – the effect on ELSS Mutual Funds


Tax saving 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.

These funds can be evaluated by four major factors. Those are Fund-Returns, Fund-History, Expense Ratio and Financial Parameters.


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 and online mutual funds investments,  contact WealthApp financial consultant now!