What is ELSS and Who can invest in ELSS

What is ELSS and Who can invest in ELSS

ELSS-Equity Linked Savings Scheme

What is ELSS?

Everyone looks to reduce their tax liability and searches for the incomes which are tax free. ELSS is the best way to invest your money without attracting any tax on it. ELSS stands for Equity Linked Saving Scheme. It is a mutual fund investment in stock market. ELSS is an open-ended mutual funds which not only saves tax but also helps in growing your money.

Who can Invest in ELSS?

Any individual or HUF in India can invest in ELSS. NRI’s can also invest in ELSS. But most companies do not accept investments from NRI’s from US & Canadian citizens.

How can someone invest in ELSS?

Many mutual fund companies offer ELSS. A person can Invest in ELSS either in lumpsum or on SIP (Systematic Investment Plan) basis. There is no restriction on the amount to be invested in ELSS.

What is SIP investment?

Through SIP, a person can invest in small lots as savings. Minimum investment must be Rs.500 per month. There is no maximum limit. SIP’s are suitable for small investor who cannot invest in lumpsum at a time. It cultivates the habit of regular savings.

Lock-in period?

ELSS do not allow investors to redeem before the completion of lock-in period. Every ELSS has a lock-in period of 3years. ELSS invested through SIP has lock in period of 3yrs which is calculated for each such investment. ELSS has the lowest lock-in period when compare to other investment plans like NSC, PPF, etc.

Tax benefits of ELSS?

Benefits from ELSS can be termed as EEE benefit, which means it is exempted at the time of investment; Income receipt and sale. If u Invest in ELSS u can get a deduction upto 1,50,000 under 80C every year. Long term capital gains earned after 3 years lock-in period are exempted in the hands of Investor.

Options in redemption of Investment?

The ELSS scheme gives u 2 options in investment

1. Growth option.

2. Dividend option.

Growth option?

In growth option; one cannot get any return during lock in period. Every year incomes will be accumulated to your investment and re-invested.

Dividend option?

In dividend option; investor gets some amount every year during the lock in periods which is tax-free.

However, both the options will give same return. Dividend payment is from the NAV of the scheme which will result in the fall of the NAV at the end of lock in period.

And dividend payment is always depending upon the schemes profits and approval from the board.

It means if there is no profit, company is not bound to pay any dividend.

Are ELSS very risky?

When compared to other tax saving schemes ELSS are very risky. Since they are invested in stock market. So ELSS are subject to the market fluctuations.

Where to check ELSS balance?

A quarterly statement is sent by each mutual fund company to its investors showing their investments performance and their current investment value.

One can also check it through online from company’s websites.


ELSS offers the best tax saving and good return. It is like killing 2 birds in one shot namely Return & tax saving. If you think of investing in ELSS, always opt for SIP option to invest and preferably go for Growth option to redeem instead of dividend option.

Tax saving for Freelancers, Professionals, Trader and Web based agencies

10 mins of consultation. Place a request.

Some of the featured articles from our knowledge center

Business2 13a51fd54d37dfeead10bd04c34a46671e69097acf6d8002d2665eb06b5cf58f
What is the income tax payable on partnership firm

As per section 4 of partnership act 1932, partnership means the relationship between the person who are agreed to share the profits of business car...

Business3 1835184f1312bba0b871fddd223a24dd62299180ed03a78d9e4098813c851963
What is business income on presumptive basis under section 44ad and 44ada

As per section 44AA income Tax act 1962, every person who is carrying on business or profession is required to maintain books of accounts. However,...

Business1 8b8cee9b60a38e9df92fb5b897e7c09195532b3d70b7ec28803a600cf2ce60cd
What is GST and different types of GST forms

The Prime Minister approved “The constitution amendment bill for Goods and Service Tax”(GST) in the Parliament Session (Rajya Sabha on 3 August 201...