What is ELSS Funds with Examples?

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Investing in an ELSS mutual funds, which is also called an Equity Linked Savings Scheme, can help you reduce the amount of your investment income that you have to pay taxes on. It is a mutual fund that invests in a wide range of stocks and shares. This gives you access to the stock market while spreading your tax liability over a wider range of companies. If you want to grow your money and fight inflation at the same time, ELSS Funds may be your best bet.

Investors want to make money, get steady returns, and save money on taxes. There are a lot of different ways to invest, but the vast majority of them give returns that are govern by the Income Tax. This is where money from an ELSS can come in handy. Equity-Linked Savings Scheme Funds, or ELSS Funds, are mutual funds that invest in stocks and give tax breaks. In this article, we’ll go over everything you need to know about ELSS tax-saving mutual funds.

What are ELSS Funds?

Equity-linked savings plans (ELSS Funds) are a type of mutual fund that invests in many different stocks. Most of the money in these funds is invest in stocks of public companies. The stocks were chosen to cover a wide range of industries and market sizes (Large Caps, Mid Caps, and Small Caps). Long-term, the main goal of these investments is to grow in value. The fund’s managers choose stocks after doing a lot of research on the market in order to get the best return for the amount of risk in the portfolio.

ELSS funds are a type of equity fund because most of their assets are invest in stocks and other instruments related to stocks. Section 80C of the Income Tax Act lets investors deduct up some limit from their taxable income each year if they invest in an ELSS fund.

Example of ELSS Fund

Some example of ELSS mutual funds are IDFC Tax Advantage (ELSS) Fund, HDFC Tax Saver Fund, SBI Long Term Equity Fund and more.

“Equity Linked Savings Plan” (ELSS) is a type of mutual fund that focuses mostly on the stock market. You can get a tax break if you invest up to limited amount in an ELSS mutual fund, according to section 80C of the Income Tax Act. When compared to other ways to save for taxes, the three-year lock-in period for ELSS is a big plus.

It means you can’t cash out until three years have passed since the date you bought the stock. But if you want to get the most out of your ELSS investments, you should leave them alone for as long as you can. Due to the three-year lock-in period, each payment in your ELSS SIP (Systematic Investment Plan) will have a different date when it will be paid off.

Ways to Invest in ELSS Fund

Most of the time, equity funds invest in the stock of different companies with different market caps. Let’s look at the different ways to invest in ELSS Funds.

Dividends Payout Potential

In this plan, a dividend is a regular payment made to an investor that is not taxable. When there are extra profits, and only then, the dividend is paid out.

Opportunities for Growth

If you choose the growth path, there are no dividends. Investors don’t get gains until they cash out, which raises the NAV and, in turn, the profits. Keep in mind that your returns could go up or down depending on how the market is doing.

Dividends Reinvestment Option

This is a choice that an investor can make if they want to reinvest dividends to raise their NAV. This strategy works very well when the market is going up and people think it will keep going up.

Why to Invest in ELSS Mutual Fund?

There are many good things about ELSS Tax Savings Funds. Mutual funds put their money into both big and small businesses, so investors can get both growth and stability. Let’s look at the advantages of ELSS Funds investments to see if they’re right for you.

Minimum Investment

Most ELSS plans only require you to put in Rs.500 at first. This makes sure that you can start investing right away, without having to wait until you have a lot of money.


Most ELSS funds give their money to many different companies, big and small, in many different industries. So, your portfolio can benefit from having more kinds of investments.

Available in SIPs

Even though you can put a lot of money into an ELSS scheme all at once, most people choose to put in smaller amounts regularly through a system called a systematic investment plan (SIP). This is because SIPs offer tax benefits and the chance to build wealth.

Also, there is no limit on how much you can invest, but Section 80C of the Income Tax Act puts a limit on the tax benefits you can get. Also, after the first three years, you are not require to sell your investment.

Benefits of ELSS Mutual Fund

An Equity Linked Savings Scheme (ELSS) fund is a type of mutual fund that gives investors a lot of benefits. Here are some of the benefits of ELSS Mutual Funds :

Limited Lock-in Period

Most of the time, you have to commit to these types of mutual fund schemes for at least 3 years. So, you can’t get your money out of your ELSS unit investments for at least three years from the date you put it in. For SIP investments, the lock-in period starts on the date of each investment, not the date the SIP was first set up.

Higher Returns

Under Section 80C, you can invest in fixed income products like PPF and FDs. ELSS, on the other hand, has returns that are tie to the market. ELSS may have much higher returns than other types of investments over the medium to long term.

Tax Saver ELSS

Long-term capital gains from ELSS investments are not taxable up to a certain limit. Gains of more than Rs. 1 crore are taxable at a rate of 10%. Low tax rates and high returns will give you the best after-tax returns.

Simple Investments Options

Putting money into investments on a regular basis is a simple and easy way to get rich. A monthly SIP is a simple and easy way to invest in ELSS funds (SIP).


Stock-linked saving scheme (ELSS) funds are mutual funds that invest mostly in equity schemes to reduce taxes. The Indian Income Tax Act, Section 80C, gives tax breaks for investments in ELSS. ELSS Mutual Funds must be held for at least three years.

Investors can take advantage of deductions from their total income that the Income Tax Act of 1961 allows from time to time. They can do this by investing in a variety of corporate stocks and other instruments related to stocks. No one can promise that the investment goal of the Scheme will be met.

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