Are ELSS funds still relevant for tax-saving investment before March 31, 2026? 5 points to know

Equity-linked Savings Schemes (ELSS) witnessed a net inflow of ₹735.38 crore in March 2025 as investors rushed to make last-minute tax-saving investments under the old tax regime before the new rules announced in Budget 2025 kicked in.

In Budget 2025, Finance Minister Nirmala Sitharaman made income up to ₹12 lakh (₹12.75 lakh for salaried persons) tax-free under the new tax regime. This change not only made the new regime more attractive compared with the old regime, but also appears to have taken the charm off ELSS funds. And data proves this.

March 2025 was the last month when this once-popular tax-saving instrument saw such a huge inflow of fresh money. Data shows that barring August 2025, when ELSS funds recorded a net inflow of ₹59.15 crore, this tax-saving category has seen net outflows every month. In the first two months of 2026, ELSS funds recorded net outflows of ₹650 crore and ₹594 crore in February and January, respectively.

ELSS funds: Month-wise net inflow

As the tax-saving month of March 2026 approaches its end, many investors are wondering whether ELSS funds are still worth investing in for the dual benefit of tax-saving and equity returns. If you are among them, here are five points that will help you decide.

The answer can be both yes and no, depending on the tax regime you choose.

ELSS funds remain relevant for taxpayers who are still under the old tax regime and want to invest in an equity instrument for tax-saving under Section 80C of the Income-tax Act, 1961.

However, ELSS funds are not relevant for tax-saving under the new tax regime, as it doesn't allow any deductions.

ELSS schemes may still be somewhat relevant for investors seeking large-cap exposure, as they mostly invest in large-cap stocks. But these schemes have a mandatory lock-in of 3 years. If you don't want this lock-in, then you can get large-cap exposure directly through a large-cap fund or through Nifty50/Nifty100 index funds.

Please note, ELSS schemes are similar to flexi-cap funds, investing across large-, mid-, and small-cap stocks. However, they are heavily tilted towards large-cap stocks. But that is also the case with most flexi-cap funds.

The net AUM of ELSS schemes in February 2026 was around ₹2,45,351 crore. There hasn't been a drastic drop in net AUM over the last several months. There are two apparent reasons for this:

• Investors' money in ELSS funds is locked-in for three years.

• The underlying assets of most ELSS funds have performed well, resulting in strong returns. This has encouraged existing investors to remain invested in ELSS funds.

As of March 17, 2026, the three-year annualised returns of most of the ELSS schemes are in double digits. Only one scheme has a single-digit annualised return of 6.73%. At least six ELSS schemes have delivered over 19% annualised returns in three years.

While the three-year annualised returns of most of the large-cap schemes are also in double digits, there is not a single large-cap fund with over 19% annualised returns in this period

If you are already invested in ELSS schemes, you cannot withdraw your money before the completion of the three-year lock-in period. After that, you can decide whether to remain invested based on how useful the fund is in your overall portfolio.

Beyond tax-saving, there is an indirect benefit of these funds. The three-year lock-in can force discipline among investors, preventing hasty exits during volatile markets.