ELSS (equity linked savings schemes) mutual funds provide investors with the dual benefit of tax deductions and long-term wealth creation. These come with a lock-in period of three years, which is the shortest among all tax-saving instruments. ELSS are preferred by investors since these have the potential to generate the highest returns among all 80C options.
Read More: ULIPs-vs-ELSS; Comparison of ELSS funds with ULIPs
Here, we will provide a brief explanation on ELSS funds for beginners and share top 5 fund recommendations in the ELSS category.
ELSS funds or Equity Linked Savings Scheme are equity funds that invest the corpus collected from investors, mainly in equity or equity-related instruments. ELSS are primarily tax saving schemes as investors can avail a tax exemption of up to Rs. 1.5 lakhs from their yearly taxable income as per Section 80C of the Income Tax Act.
ELSS mutual funds follow an asset allocation strategy comprising 65% of equity and equity-linked securities, such as listed stocks. Some funds also invest in fixed-income securities to a certain extent.
Here’s why investors can consider investing in ELSS funds:
The objective of the scheme is to generate regular long-term capital appreciation through a diversified portfolio of equity and equity-related securities. It primarily invests in companies that have a strong growth & sustainable business model.
| Inception Date | 29th December 2009 |
| Benchmark Name | Nifty 500 TRI |
| Fund Manager | Jinesh Gopani |
| Expense Ratio | 1.60% |
| Fund type | Open-ended |
| Risk | Medium-High |
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 11.15% | -11.16% | 11.49% | 10.49% | 16.15% |
This scheme is ideal for Investors who are looking to fetch higher returns by investing for at least 3 years combined with tax-saving benefits. The scheme’s objective is to achieve long term capital appreciation by investing mainly in equities across primary and secondary markets.
| Inception Date | 18th January 2007 |
| Benchmark Name | Nifty 500 TRI |
| Fund Manager | Mr. Kaushal Maroo and Mr. Rohit Singhania |
| Expense Ratio | 1.75% |
| Fund Type | Open-ended |
| Risk | Very High |
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 14.76% | 5.62% | 19.10% | 12.78% | 16.44% |
This tax plan aims to generate long-term capital growth using a diversified portfolio consisting mainly of equity and equity-related securities. With a well-researched and concentrated portfolio, the scheme aims to invest across different market capitalisation sectors and has a mandatory lock-in period of 3 years. Investors can claim a tax deduction of up to Rs. 1,50,000 under Section 80C of the Income Tax Act.
| Inception Date | 19th August 1999 |
| Benchmark Name | Nifty 500 TRI |
| Fund Manager | Mr. Harish Bihani |
| Expense Ratio | 1.92% |
| Fund Type | Open ended |
| Risk | Very High |
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 13.68% | 4.07% | 17.54% | 12.17% | 14.84% |
This ELSS fund aims to earn long-term capital growth for investors by setting up a diversified portfolio primarily consisting of equity and equity-related instruments. The scheme has a statutory lock-in period of 3 years. Through ELSS funds, investors can aim for long term wealth accumulation combined with the benefit of tax saving. These investors are eligible for a tax deduction of up to Rs 1.5 lakhs as per Section 80C of the Income Tax Act 1961.
| Inception Date | December 28, 2015 |
| Benchmark Name | Nifty 500 Total Return Index |
| Fund Manager | Neelesh Surana |
| Expense Ratio | 1.72% |
| Fund Type | Open-ended |
| Risk | Very High |
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 12.75% | 1.94% | 19.81% | 14.34% | – |
The objective of the IDFC tax advantage ELSS scheme is to build a diversified portfolio of stocks belonging to companies that have strong fundamentals with reasonable valuations. The scheme mostly invests in equities and equity-related instruments with a small portion of the portfolio allocated towards debt & money market instruments. The scheme has a statutory lock-in period of 3 years to avail benefits of tax savings.
| Inception Date | 26th December 2008 |
| Benchmark Name | S&P BSE 500 Total Return Index |
| Fund Manager | Daylynn Gerard Paul Pinto |
| Expense Ratio | 1.94% |
| Fund Type | Open ended |
| Risk | Very High |
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 15.26% | 7.00% | 24.32% | 12.71% | 16.75% |
Kotak Tax Saver fund aims to fetch long-term capital appreciation through a diversified portfolio comprising equity and equity-related securities. Through this investment, investors can avail of income tax deduction of up to Rs. 1.5 lakhs under Section 80C depending on prevailing tax laws. The fund has a statutory lock-in period of 3 years to ensure wealth accumulation combined with tax benefits.
| Inception Date | 23rd November 2005 |
| Benchmark Name | NIFTY 500 Total Return Index |
| Fund Manager | Harsha Upadhyaya |
| Expense Ratio | 1.97% |
| Fund type | Open-ended |
| Risk | Very High |
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 17.96% | 7.87% | 19.26% | 13.22% | 14.63% |
Any individual with an income can invest in Equity-Linked Saving Scheme (ELSS) funds. There are no restrictions on this investment based on age, income, or occupation. However, investors must consider their personal financial goals and risk tolerance before investing in ELSS funds, as they are equity-based investments and can be subject to market volatility.
One can invest in Equity-Linked Saving Scheme (ELSS) funds through various channels such as a bank, a mutual fund distributor, or directly with a mutual fund company. One can also opt for systematic investment plans (SIP) or lump-sum investments.
To invest in ELSS funds easily, investors can download the Fisdom app on their smartphone.
Here are some important aspects to consider before investing in ELSS funds:
Like all mutual fund investments, ELSS comes with many benefits and disadvantages. An investor must try to align personal investment goals with the fund objective. It is important to carefully consider individual risk appetite and investment horizon against the scheme’s risk levels and investment duration. Investments made after conducting basic research can help investors get maximum benefits.
Incentives like tax savings, the benefit of small monthly investments, and the potential to generate long-term wealth are some of the main reasons why ELSS makes for a good investment choice for new investors.
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