ELSS — Equity Linked Savings Scheme — What It Is, Who Should Invest & Best Funds
SEBI definition: Equity fund with 80% minimum in equities, eligible for tax deduction under Section 80C. Mandatory 3-year lock-in.
Who should invest
Any Indian taxpayer investing up to ₹1.5 lakh per year under Section 80C. Best for those already comfortable with equity risk who want to save tax.
| Risk level | Moderately High |
| Suggested horizon | 3+ years (mandatory lock-in; recommended 5+ years) |
| Historical returns | 12–15% CAGR historically over 5+ years |
| Taxation | Contributions: deductible up to ₹1.5L under 80C. Gains: LTCG at 12.5% above ₹1.25L after 3-year lock-in. |
Advantages
- Section 80C deduction up to ₹1.5L = up to ₹46,800 tax saved
- Lowest lock-in (3 years) among all 80C instruments
- Equity returns vs FD/PPF
Drawbacks
- 3-year mandatory lock-in per instalment
- Equity market risk
- Tax on gains above ₹1.25L at 12.5%
Frequently asked questions
Can I withdraw ELSS before 3 years?
No. Each SIP instalment has its own 3-year lock-in from the date of investment. You cannot redeem any unit before the lock-in period ends.
ELSS vs PPF — which is better for tax saving?
PPF has 15-year lock-in with ~7.1% guaranteed return. ELSS has 3-year lock-in with ~12-15% historical equity return but with market risk. For long horizons with equity tolerance, ELSS is better. For guaranteed returns and no market risk, PPF wins.
Related categories
See the best ELSS — Equity Linked Savings Schemes ranked by data, or filter every scheme in the fund screener. Historical returns describe the past only — mutual fund investments are subject to market risks.