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Why ELSS is a Great Investment? Research Team | Posted On Friday, February 07,2020, 01:02 PM

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Why ELSS is a Great Investment?



Its tax season and investors are in a hurry to invest in ELSS schemes. ELSS invests more than 80-90% in equity (stocks). Equity is a great investment over the long term. ELSS has a lock-in period of 3 years which forces you to stay invested and enjoy good returns.

ELSS enjoys the Section 80C tax deduction up to Rs 1.5 Lakhs a year. You can save Rs 46,800 a year on falling in the highest tax bracket. Though ELSS has a long term capital gains tax (LTCG Tax) of 10% on gains over a Lakh, it still remains an excellent tax-efficient investment.

So why is ELSS an excellent investment? Let’s find out. Want to know more on Tax Planning? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

Why ELSS is a Great Investment?

ELSS is Great for Beginners in Equity:

Many risk-averse investors in India are missing a great opportunity to earn good returns and also save taxes. The ELSS is the twin benefits of good returns and tax benefits.

If you are new to equity, ELSS is a great way of jumping into it. With the compulsory 3-year lock-in, beginners are forced to stay invested and could earn good returns.

See Also: 5 Things You Should Know Before Investing In An ELSS

Take a look at this. ELSS has given returns of 9.4% and 8.3% for the 5-year and 10-year category.

Returns of Top 5 ELSS:


5-Year CAGR

Mirae Asset Tax Saver Fund -Reg(G)


Axis Long Term Equity Fund - Reg(G)


IDBI Equity Advantage Fund- Reg(G)


Motilal Oswal Long Term Equity Fund - Reg(G)


Union Long Term Equity Fund(G)




5-Year CAGR

Mirae Asset Tax Saver Fund -Reg(G)


Axis Long Term Equity Fund - Reg(G)


Tata India Tax Savings Fund- Reg(G)


Motilal Oswal Long Term Equity Fund - Reg(G)


Essel Long Term Advantage Fund- Reg(G)


ELSS vs Tax Saving Options Under Section 80C:

ELSS has the shortest lock-in among all tax-saving investments in just 3 years. PPF has a 15-year lock-in, while NSC has a lock-in period of 5 years.

See Also: How to Invest in ELSS?

How To Save Tax with ELSS?

Sudesh is a senior IT professional. He earns an income of Rs 12 Lakhs. He falls in the 30% income tax slab. How can he save taxes with ELSS?

Sudesh avails ELSS tax benefit up to Rs 1.5 Lakhs under Section 80C. His taxable income is Rs 10.5 Lakhs. He has saved (31.2% of Rs 1.5 Lakhs) = Rs 46,800.

Should You Continue with ELSS in The New Tax Regime?

There is still confusion about whether to shift to the new regime or continue with the old regime. However, some people do benefit from the new tax regime and some are better off under the old tax regime.

If you are investing in ELSS through SIPs, it’s better to continue the investment. ELSS invests in multi-cap stocks which give good returns over the long-term. Continue with ELSS irrespective of the tax regime. Treat it just like any equity investment. Continue with ELSS until you achieve the financial goal.

See Also: Should You Invest in ELSS Beyond the Section 80C Limit?

Avoid These Mistakes When Investing in ELSS:

  • Invest in ELSS through SIPs instead of a lump sum.
  • ELSS invests heavily in equity. This means high returns at high risk.
  • Invest in ELSS only if it matches risk profile and financial goals.
  • Don’t opt for the dividend option in ELSS. Go for the growth option where profits are reinvested.
  • Take the help of a financial adviser before investing in ELSS.
  • Don’t invest in too many ELSS schemes. Stick to 2 good ELSS schemes.

Invest through ELSS-Regular Plan

  • You can invest in the ELSS with the help of a mutual fund distributor like a bank or a stockbroker. Services offered are online-offline. There are additional fees that get added to the cost of investment. This means a higher expense ratio. If you ELSS with lower expense ratio, opt for Direct Plans.

See Also: Why ELSS is the Best Tax Saving Option Than 80C Investments?

Invest through ELSS-Direct Plan

  • Opt for the online route where you invest directly with the AMC. You can invest through Registrar like CAMS and Karvy which have a number of mutual funds enrolled with them.

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