Understanding ELSS (Equity Linked Saving Scheme): The Ultimate Tax Saver Mutual Fund

Understanding ELSS (Equity Linked Saving Scheme): The Ultimate Tax Saver Mutual Fund

Equity Linked Saving Scheme is an attractive investment option for saving taxes and growing wealth. ELSS is a mutual fund providing potential long-term capital appreciation and tax benefits.

ELSS should be on your radar if you’re looking for the best tax saver mutual funds to invest in 2023. Let us explore what ELSS is, its features benefits to look out for, and how you can make the most of this tax-saving investment.

Three years ago, I was looking to invest some of the money I had gotten from a freelancing gig. Not wanting to keep so much money free in my account, I decided to put this money up in an ELSS to save on taxes and make some returns on it.

After some research, I learned about Bajaj Finserv and decided to go with them as my partner in this investment. A few days ago, I got my return and was ecstatic at how much I have earned in this short while, as I have saved on a lot of tax by investing in ELSS.

What is ELSS?

ELSS is a category of mutual funds that primarily invests in equity and equity-related instruments. ELSS has a lock-in period of just three years, so you must complete this period before redeeming your investment.

This is the shortest lock-in period with the potential for higher returns than other tax-saving options, such as PPF or NSC, due to their exposure to equities.

Although ELSS has a similar level of risk as dealing with stocks, there are different levels of risk for investors with different risk appetites.

Features of ELSS

1. Lock-in Period

ELSS funds have the shortest lock-in period among all tax-saving investment options at three years. This means that you can redeem your investment after three years.

2. Potential for Higher Returns

ELSS funds invest primarily in equities, offering the potential for higher returns over the long term. So it is vital to use a mutual fund calculator to know your potential returns from the fund you wish to invest in after risk assessment.

3. SIP Option

ELSS funds allow investors to invest through the SIP route, enabling them to invest a fixed amount at regular intervals offering with it the many benefits associated with SIPs.

  1. Tax Benefits

There are several tax benefits, including being able to claim Rs. 1.5 lakh tax deduction per financial year for investments made into ELSS. Another tax benefit is Rs. 1 lakh tax exemption on long-term gains, and dividends received are tax-free.

Choosing the Best ELSS Fund

When selecting the best tax saver mutual funds, there are certain factors to consider:

●     Fund Performance

Evaluate the fund’s historical performance over different market cycles to see whether they have consistent returns and perform well among its peers.

●     Fund Manager Expertise

The fund manager plays a crucial role in managing the fund’s portfolio. Assess the fund manager’s experience, track record, and investment philosophy before investing.

●     Risk Profile

Evaluate the fund’s risk profile and align it with your risk tolerance. ELSS funds deal with equities and thus are volatile in the short term.


ELSS offers a great promise of tax benefits at a low lock-in period and higher returns than similar products. Its compelling benefits and the potential for higher returns make it the best mutual funds for saving taxes.

So I recommend using Bajaj Finserv’s calculator to assess the potential returns and SIP investment amounts based on your financial goals and risk appetite as you plan your investment into the most suitable ELSS fund for your portfolio.

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