ELSS or Equity Linked Saving Schemes has established themselves as one of the most profitable forms of tax saving investment. But even after the popularity that surrounds ELSS from among the millennial generation, there are a number of investors who still prefer the other form of tax saving investments like Fixed Deposits, Public Provident Fund etc.

One reason behind this still lack of interest from the masses towards ELSS funds is the lack of understanding about the mode of investment.

In this article, we are going to look at the frequently asked questions related to ELSS to help you get an understanding of what the mode of investment entails.

Without further delay, let us begin.


  1. What is ELSS?

Equity Linked Savings Scheme is a form of Mutual Fund investment that is linked with equity. The ELSS funds are exempted under the Section 80c of Indian Income Tax Act. The fund comes with a 3 years lock-in period, which is a lot lower than any other form of Tax saving investment modes.


  1. What are the Features of ELSS Funds?

To sum up what ELSS entails, here are the different features –

l  ELSS investment can be made with as low as Rs. 500 through the SIP route

l  It comes with a 3 years lock-in period

l  10% tax will have to be paid on the capital gains that exceed Rs. 1 Lakh annually.

l  Gives Higher returns in the long-term.


  1. What is the range of Amount of Investment?

The minimum amount of investment that you will have to do in ELSS investment is Rs. 500 and there’s no maximum range. However, in order to claim tax deductions, you will have to make Rs. 1.5 Lakhs investment in ELSS funds.


  1. How is the Tax Deducted in ELSS Mutual Funds?

The number of investments made in the ELSS schemes are eligible for tax deduction from the gross income under the Section 80c of the Income Tax  Act. So, in case you are paying the tax of over 20.9%, you will be able to save around Rs. 20,900 on the Rs. 1.5 Lakh investment made through ELSS.


  1. Where does ELSS stand in front of the other tax saving options?

ELSS as compared to all the other form of tax saving investment models come with the shortest lock-in period of 3 years (while the others are around 5 and 15 years). Also, while the returns generally vary from 8 to 12% in the case of ELSS, the range usually lies in the 18-20% range.


  1. When to Make an Investment in ELSS?

There’s no golden period when it comes to ELSS investment as it is a mode that comes in the form of long-term investment, you won’t have to worry about the market timing or NAV of the fund scheme.


  1. How to do ELSS Investments?

There are two options when it comes to making investments through ELSS – 1. Lump-sum and 2. SIPs. Basically, you can either make an investment in name of ELSS funds one at a time through Lump-sum or have a monthly deduction plan – SIPs.


  1. Should you choose Growth or Dividend mode of ELSS investment?

If you select the Growth option, it will ensure that compounding happens on the capital in the mutual fund you have invested, meaning the final amount can get redeemed when the lock-in period ends.

However, the dividend option gives the exact same amount for different time periods while offering liquidity even when there is a lock-in period.The dividend that you get can then either be invested in some other mutual funds or can be re-invested in the ELSS.

So, here were eight frequently asked questions related to ELSS funds that we guess would be sufficient to get you started with ELSS investment. But, it doesn’t stop here, there are a number of other things that you will have to consider such as the fund scheme, the frequency of SIPs you make, and the portfolio that you build, amongst others.

Now that we have looked into the different questions that you are ought to know before you make the investment, it is time to get started with the ELSS investment. Get in touch with our mutual fund experts and get started.