ELSS (Equity Linked Mutual Fund) is a kind of equity mutual fund which invests 80% of their assets on equity or equity related instruments. The lock in period of an ELSS is at least three years. It qualifies the tax exemption of 80C of the income tax act. The maximum exemption for an ELSS is Rs. 1, 50,000.
ELSS is mostly an open-ended equity fund. Which means an investor can enter the fund any time. An investor can start investing in ELSS from Rs.500/-, there is no upper limit in this investment.
There are two ways you can invest in ELSS Funds
- Growth
- Dividend
Benefits of investing in ELSS Mutual Funds
- Tax saving is the main reason to invest in ELSS. By 80C income tax act you can save up to Rs.1, 50,000.
- You can build your own investment habit for a longer time because the lock in period in ELSS are three years while other mutual funds does not have any lock in period.
- ELSS invests in equity funds so you can earn a good return after three years you can redeem your benefits.
- In ELSS you can start from Rs.500/- which is very pocket friendly.
- Some ELSS Funds allows you to invest in stock market. Savings account just gives you a return of 8% but in this you can get higher returns.
ELSS Vs PPF and NSC
| Parameters | ELSS | PPF | NSC |
| Tenure | 3 Years | 15 Years | 5 Years |
| Returns | Linked to equity market | 7.8%* compounded annually | 7.8%* compounded annually |
| Minimum Investments | Rs.500/- | Rs.500/- | Rs.100/- |
| Maximum Investments | No Limits* | Rs.1,50,00 | No Limits* |
| Tax deduction amount under 80C | Rs. 1,50,000 | Rs. 1,50,000 | Rs. 1,50,000 |
| Interest for taxation | Dividend and long term capital gains are tax free | Tax Free | Taxable |
| Safety | High Risk | Highest | Highest |
Top 6 ELSS Funds in 2019
| Fund Name | 3 Year Returns | 5 Years return | 10 Years Return | Fund Manager Name |
| Motilal Oswal Long Term Equity Fund | 14.22 | – | – | Mr. Gautam Sinha Roy, Mr. Abhiroop Mukherjee |
| Aditya Birla Sun Life Tax Relief 96 | 12.91 | 19.08 | 19.32 | Mr. Ajay Garg |
| L&T Tax Advantage | 13.06 | 16.14 | 18.37 | Mr. S.N Lahiri |
| HDFC Long Term Advantage Fund | -4.84 | 16.05 | 18.83 | Mr. Chirag Setalvad |
| Invesco India Tax Plan | 12.47 | 17.83 | 19.57 | Mr. Amit Ganatra, Mr. Dhimant Kothari |
| Axis Long Term Equity Plan | 11.66 | 19.26 | – | Mr. Jinesh Gopani |
