ELSS
Definition
Equity Linked Savings Scheme — tax-saving mutual funds with the shortest lock-in period of 3 years among all Section 80C instruments. Invests primarily in equities (65%+ in stocks). Historical returns: 12-15% over 10 years. Qualifies for ₹1.5L deduction under Section 80C.
Why is ELSS Important?
In the context of wealth creation and investing in India, ELSS is a fundamental concept. Whether you are investing in mutual funds via SIPs, fixed deposits, or retirement schemes like PPF and NPS, this metric helps evaluate potential returns and risks. The power of compounding and market volatility make it essential to track this indicator for any long-term portfolio.
Investors are encouraged to use specific investment calculators to project the future value of their corpus. Understanding this term enables better asset allocation, inflation protection, and consistent progress toward your ultimate financial goals.
What is ELSS?
Equity Linked Savings Scheme (ELSS) is a type of equity mutual fund that offers tax deduction under Section 80C (up to ₹1.5 lakh). It has the shortest lock-in period (3 years) among all 80C instruments.
ELSS vs. Other 80C Investments
| Investment | Lock-in | Returns | Risk |
|---|---|---|---|
| ELSS | 3 years | 10-15% (market-linked) | Moderate-High |
| PPF | 15 years | 7.1% (fixed) | Zero |
| Tax-Saving FD | 5 years | 6.5-7% | Very Low |
| NSC | 5 years | 7.7% (fixed) | Zero |
ELSS Tax Treatment
- Investment: Deductible under Sec 80C (up to ₹1.5L)
- Gains up to ₹1.25L: Tax-free (LTCG)
- Gains above ₹1.25L: Taxed at 12.5% (LTCG)