Invest in Tax Saving Mutual Funds

Equity Linked Savings Scheme (ELSS)

Axe Your Tax by Choosing To Invest in ELSS Schemes.

Axe Your Tax by Investing in ELSS.

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Have you ever thought about saving taxes while creating wealth? If yes, then you can rejoice now because there is a perfect single instrument that can aid you in achieving both objectives smoothly.

Equity Linked Savings Scheme (ELSS) is a single plan, popularly known as the tax-saving mutual funds. ELSS schemes are the best financial instruments that enable you to claim tax deductions. You can invest in ELSS schemes and get the dual benefit of tax deductions and wealth accumulation over a while.

What is Equity Linked Savings Scheme (ELSS)?

Equity Linked Savings Schemes are tax-saving mutual funds that invest mainly in financial instruments related to equities. An equity-linked savings scheme or an ELSS fund is a mutual fund that comes under Section 80C of the Income Tax Act, 1961, and is eligible for tax deductions. This category of mutual fund invests more than 65% of the corpus in equity or equity-related instruments. ELSS schemes have the shortest lock-in period of just three years, making ELSS investment one of the best ways to save taxes to create wealth over a period.

What are the modes available to start an ELSS investment?

There are two modes available to invest in ELSS scheme:

What are the factors to consider before you choose to invest in ELSS Schemes?

Below are the factors, you have to consider while choosing to invest in tax saving mutual funds:

  • Investment horizon: Your investment horizon should be more than five years when you consider investing in ELSS schemes. The equity exposure of ELSS schemes requires a longer investment horizon to take the edge off market volatility.
  • Returns: You should understand these tax-saving mutual funds that may not offer assured returns as they are dependent on the underlying securities performance. However, the longer duration of investment can give higher returns than many other tax-saving mutual funds investments.
  • Lock-in period: In ELSS mutual funds, your investments are locked-in for three years from the date of investment mandatorily. Your holdings cannot be redeemed until the completion of this period.

Why are ELSS Schemes perfect for saving taxes as well as wealth creation?

Tax benefits of ELSS

Unlike normal mutual funds, ELSS Schemes attract several investors. ELSS Schemes are tax-saving mutual funds that allow tax deductions of Rs. 1.5 Lakh per annum from the investments, under Section 80C of the Income Tax Act. This means based on the amount you invest in ELSS your taxable income can be reduced, which in turn will lower your income tax.

Besides that, after a 3 years lock-in period, tax exemption is applicable to your maturity amount or the amount earned by your ELSS if it is equal to or below Rs. 1 Lakh. In case, the amount is more than that, then a long-term capital gains tax of only 10% should be paid. In this way, you can pay fewer taxes using ELSS and save up on your money.

Invest In tax saving mutual funds for excellent long term returns

Market volatility occurs over short periods, and staying invested for a longer duration means that your investment will be safe from that. As per many seasoned investors, the best way to accumulate wealth is to stay invested for long periods.

When compared to other tax-saving funds, ELSS Schemes provide you with significantly better returns over the long term. So, even though ELSS has a short lock-in period of 3 years, you can always invest in ELSS schemes as long as possible for greater returns.

ELSS Schemes are the best for wealth creation

When you look to invest In tax-saving mutual funds, the Equity Linked Savings Scheme is possibly one of the most beneficial tools for building a sizable corpus over a long period. And there are three main reasons.

  • Since 80% of ELSS tax-saving mutual funds are invested in equity, they have an immense potential to generate better returns. Because the equity market, besides certain risks, can grow exponentially when the market is swinging upwards.
  • It is a known fact that long-term mutual fund investment can gain you healthy returns.
  • The tax-saving attribute of ELSS means you can save your money on taxes that will boost your wealth creation significantly.
  • Hence, it is apparent that ELSS is one of the best and most preferred ways for saving taxes and wealth creation.


1. Tax benefits are subject to the provisions of the Income Tax Act, 1961 and are subject to amendments, from time to time.
2. Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.
3. *Calculated at 30% tax bracket (as per old tax regime) and includes 4% cess
4. Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Please consult your own tax consultant to know the tax benefit available to you.

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