ELSS (Equity Linked Savings Scheme)
Also known as: Equity Linked Savings Scheme, ELSS mutual fund, tax-saver mutual fund
ELSS is a category of equity mutual fund that qualifies for tax deduction under Section 80C of the Income Tax Act, with a mandatory 3-year lock-in.
ELSS funds invest primarily (at least 65%) in equity and equity-related instruments. They serve a dual purpose: they grow your wealth through equity exposure, and they reduce your taxable income under Section 80C up to ₹1.5 lakh per financial year.
The defining feature of ELSS is the 3-year lock-in — the shortest of any 80C instrument. Compare this to PPF's 15 years or a 5-year tax-saving FD's 5 years. The short lock-in plus equity exposure is what makes ELSS uniquely attractive for long-term wealth building with tax benefits.
Returns are market-linked and not guaranteed. Long-term ELSS performance has historically tracked the broader equity market, averaging 11–14% CAGR over 10+ year horizons. Short-term performance can swing sharply in either direction.
Gains above ₹1 lakh per financial year are taxed at 10% as Long-Term Capital Gains (LTCG), since the lock-in itself guarantees a 3+ year holding period.