Everything to know about ELSS Funds – Best Tax Saving Option in 2023

ELSS –  Is it really a Best Tax Saving option?

Over the period of time, the charm in traditional way of saving Tax like NSC, KVP and Tax Saver FDR are gone and new generation are more likely to invest in such funds where the get dual benefit of wealth accumulation as well as tax deduction. The ELSS has a lock in of 3 years as well as offer highest return. It is similar to Tax Saver FDR (having 5 year maturity period) but with higher return and lowest period. Let us understand in detail about one of the best option available for tax saving i.e. ELSS.

What exactly is ELSS fund?

ELSS fund is one of the kind of Mutual funds where you can get rebate of upto Rs. 1,50,000.00 and by investing in it. It is an equity linked saving scheme eligible for tax deductions under Section 80c of Income Tax Act 1961.

Most of the allocation of ELSS is made towards equity and equity linked securities.

Important points about ELSS funds.

The following are the main points related to ELSS mutual funds:

  • Lowest lock-in-period of three years and taxpayer have no option to make premature exit.
  • Total tax deductions of Rs. 1.50 Lacs under Sec 80 of Income Tax Provision acts.
  • Maximum amount is not defined but minimum is as per different fund houses available in the market.
  • ELSS may give you highest return with shortest period of lock-in.
  • As informed earlier, the majority of fund consists of equities but also consists of fixed income securities also.


Factors to considered before investing in ELSS

  1. Return in the investment: As the ELSS is equity linked saving scheme, the returns are dependent on market. A 3 to 5 years time period may provide you a better return on your investment.
  2. Time period of the investment: A longer investment in the ELSS will help to get better return and mitigate the market risk as well.
  3. Lock-in period: There is a lock-in period of three years in ELSS. Your investments are mandatorily locked-in for three years from the date of investment, and you cannot redeem your holdings until the completion of this period.


Tax Benefit offered in ELSS

ELSS provides total deductions of Rs. 1.50 Lacs a year under the provision of the Income Tax Act 1961. But the point to note is that there is lock in of 3 Years in the ELSS.

How can one invest in ELSS?

Investment in ELSS can be made  in monthly deduction mode i.e. SIP or lumpsum can also be done.

Asking about the preferred way of investing, SIP will be preferred over lumpsum as SIP distribute the risk among the time period and if markets are down, you get more units.

This facility is not available in lumpsum. You invest one time in ELSS for period of 3 years and fixed amount of units will be in your portfolio for the whole duration.

Hence it is advisable to invest in SIP mode in ELSS to get more profit out of your investment.

Comparison of ELSS With Other Tax-Saving Instruments

There are various tax-savings schemes to help you accumulate wealth over time, such as FD, PPF, NSC to name a few. But the returns offered by these schemes are restricted. This is where ELSS stands out – its returns are generally higher, especially when the markets are on the bullish trend. This, coupled with a lock-in period of just three years, makes ELSS mutual funds the best tax-saving investment option. Even the post-tax returns of ELSS are much more attractive than that of any other tax-saving investment option.

Investment Returns Lock-in Period Tax on Returns
5-Year Bank Fixed Deposit 4% to 6% 5 years Yes
Public Provident Fund (PPF) 7% to 8% 15 years No
National Savings Certificate 7% to 8% 5 years Yes
National Pension System (NPS) 8% to 10% Till Retirement Partially Taxable
ELSS Funds 15% to 18% 3 years Partially Taxable


To apply online ELSS, you may visit PNB online Mutual fund page





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