ELSS deduction under new tax regime: Why AMFI is seeking fresh incentives in Budget 2026

Equity Linked Savings Schemes (ELSS), long seen as the simplest way for first-time investors to enter equities, may regain relevance if the government accepts proposals made by the Association of Mutual Funds in India (AMFI) in Union Budget 2026.

AMFI has flagged two key changes aimed at making ELSS more accessible and meaningful, especially under the new tax regime.

1. Allow ELSS investments in any amount

Currently, ELSS investments must be made in multiples of ₹500. AMFI has proposed removing this restriction and allowing investments of any amount, subject to a minimum of ₹500.

2. Introduce a separate tax deduction for ELSS under the new tax regime

AMFI has also sought a distinct tax incentive for ELSS investors opting for the new tax regime, similar to the additional deduction available under Section 80CCD(1B), with a notified cap.

ELSS continues to be a simple, low-ticket equity product and an important equity on-ramp for first-time investors. However, under the new personal tax regime, ELSS currently lacks a distinct tax incentive, which has diminished its role and attractiveness for retail participation.

Providing a separate deduction would help preserve ELSS as an easy entry point into equities and sustain long-term retail participation in equity markets.

Under the new personal tax regime, ELSS does not enjoy any exclusive tax benefit, reducing its relevance as a tax-efficient equity savings option.

AMFI has proposed providing a separate deduction, on the lines of Section 80CCD(1B) of the Act (Section 124 of the Bill), exclusively for ELSS investments under the new tax regime, with a notified cap.

This would preserve ELSS as a simple, low-ticket equity entry vehicle and help sustain retail participation in equities.

Removing the ₹500 multiple requirement for ELSS investments

Rule 3(a) of the Equity Linked Savings Scheme (ELSS), 2005, requires investments to be made in multiples of ₹500, with a minimum investment of ₹500.

In practice, investors often invest amounts that are not exact multiples of ₹500, since most other mutual fund schemes accept any amount above the minimum.

Further, when investors switch from other schemes into ELSS using the inter-scheme switch facility, the redemption proceeds may not be in multiples of ₹500. This forces mutual funds to reject applications or refund excess amounts, leading to inconvenience for investors, potential loss of tax benefits, and additional operational complexity for fund houses.

ELSS was introduced in 1992, when investments were largely made in cash at bank branches, and the ₹500 multiple helped manage collections and reconciliations. In today’s digital payment environment, this requirement has become outdated.

ELSS could get a fresh boost if AMFI’s proposals are accepted.