Written by Upstox Desk
5 min read | Updated on September 01, 2025, 15:16 IST
Understand ELSS Funds
Features Of ELSS Mutual Funds
What Tax Advantages Do ELSS Funds Provide?
What Aspects Need To Be Taken Into Account Before Making An ELSS Investment?
Why Should You Invest In ELSS Tax Saving Mutual Funds?
Conclusion
FAQs
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
Investors seek opportunities that enable them to save on taxes, accumulate wealth, and generate consistent returns. Although there are many different investment schemes on the market, the majority of them provide returns that are subject to income tax regulations. ELSS funds come into play here. Tax-saving equity mutual funds are known as Equity Linked Savings Schemes, or ELSS mutual funds.
Equity funds that allocate a significant portion of their assets to equity or equity-related securities are known as ELSS funds. Since ELSS funds offer a tax exemption of up to Rs. 150,000 from your annual taxable income under Section 80C of the Income Tax Act, they are also called tax-saving schemes.
An ELSS fund is an equity-oriented scheme with a three-year lock-in period, as the name indicates. Recently, many taxpayers have turned to ELSS schemes to take advantage of tax savings. You can claim a tax exemption of up to Rs. 1,50,000 on your investment in ELSS schemes. Moreover, the gains from this plan after three years will be classified as Long Term Capital Gain (LTCG) and taxed at 10% (if the income exceeds Rs. 1 lakh).
Some key features of ELSS funds are as follows:
By Section 80C of the Income Tax Act, they provide tax deductions of up to Rs 1,50,000 for a fiscal year.
ELSS funds cannot generate short-term profits because they are locked for three years, allowing only long-term capital gains to be realised. Tax benefits include a deduction of up to Rs 1.5 lakh on investments under Section 80C, applicable across various instruments like PPF, NSC, and ELSS. The lock-in period ensures that gains realised upon redemption are long-term, with tax exemption up to Rs 1 lakh per year. Gains exceeding this limit are taxed at 10% without indexation.
When deciding whether to invest in an ELSS mutual fund, you must take into account the following factors:
Equity-linked savings schemes (ELSS) are an excellent investment option for individuals seeking to save on taxes and build wealth. Here is why you should consider investing in ELSS:
Tax Benefits: ELSS offers a tax deduction of up to ₹1.5 lakh under Section 80C, enabling individuals to save up to ₹46,800 in taxes annually.
Higher Returns: ELSS funds predominantly invest in the equity market, which has the potential for higher returns over the long term compared to other tax-saving options.
Lower Lock-in Period: ELSS has a lock-in period for just 3 years, which is shorter than all the options under section 80C, yet provides better liquidity and flexibility, while still reinforcing long-term investment discipline.
Both new and experienced investors can use ELSS to save on taxes and create wealth linked to the equity markets.
Investing in ELSS through SIPs is a disciplined and efficient method for building wealth in the long term, while also receiving tax benefits. Since it offers a short lock-in period, high returns, and tax benefits of up to ₹1.5 million under Section 80C of the income tax, ELSS funds provide a best-of-both-worlds opportunity. Whether you are a seasoned investor or new to investing, ELSS can be a valuable element of your financial portfolio.
Most fund houses and Asset Management Companies allow a minimum SIP of ₹500 a month in ELSS mutual funds.
Yes, each SIP instalment has a lock-in period of 3 years from the date of investment.
No, ELSS funds have a compulsory lock-in period of 3 years. There are no early withdrawal options.
Yes, any amounts above ₹1 lakh will be taxed at 10% as Long Term Capital Gains (LTCG) after the lock-in.
Yes, investors can either lump sum or via SIP, or both, to help meet their financial goals.
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Upstox Desk
Upstox Desk
Team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.
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