What makes ELSS distinct
An Equity Linked Savings Scheme is a diversified equity fund with a tax twist: investments qualify for a deduction of up to Rs 1.5 lakh under Section 80C (old tax regime only) and come with a 3-year lock-in from each purchase date. Among 80C instruments like PPF, NSC, and tax-saver FDs, ELSS has the shortest lock-in and the only fully equity exposure.
Key features
- Lock-in per instalment: With an SIP, each monthly unit purchase is locked for its own 3 years, so units bought in month one free up before month twelve's.
- Taxation: ELSS is taxed as an equity fund. Long-term capital gains (held 12 months or more, which lock-in guarantees) are taxed at 12.5% on gains above Rs 1.25 lakh per financial year.
- No assured returns: Being equity, ELSS can fall in the short term. The lock-in helps investors stay through volatility.
A note on the new regime
The Section 80C deduction applies only under the old tax regime. If you opt for the new regime, ELSS still works as an equity fund but offers no tax deduction. FindMF earns no commission and recommends no specific scheme. Compare equity funds across categories.