Savings scheme

Equity Linked Savings Plan (ELSS): Section 80C allows deduction of Rs 1.5 lakh for investments in ELSS: here’s how

Equity savings plan: ELSS mutual funds have a three-year blocking period

A stock linked savings plan or ELSS is one of the most popular categories of mutual funds that offer tax benefits. Under the provisions of section 80C of the Income Tax Act 1961, a person can claim tax deductions of up to Rs 1.5 lakh in taxes by investing in a savings scheme. linked to actions. ELSS mutual funds have a lock-in period of only three years, which is much lower than other tax-saving instruments. According to the Groww equity and mutual fund investment platform, in addition to offering tax benefits, ELSS is a diversified equity mutual fund and is also used for long-term capital growth. (Read also: Balancing Income and Expenses: How to Create and Stick to a Monthly Budget)

Why is ELSS a preferred mode of investment?

  • Investors have the option of investing in ELSS mutual funds either through a systematic investment plan (SIP) or by making lump sum investments. The potential for capital appreciation, low downtime as well as tax advantages have made ELSS mutual funds one of the preferred tax saving investment options in recent times.
  • ELSS funds are also considered sustainable because people can plan for their future while saving on taxes. It offers the double benefit of tax deductions and wealth creation over time.
  • Compared to other tax saving instruments such as term deposits (FD) or public provident funds (PPF), ELSS mutual funds stand out for their generally higher returns, especially when the markets are bullish.

According to data shared by Groww, 15 percent of investors in the 25-40 age bracket invested in ELSS funds, and although they showed a slight preference for lump sum investments (41 percent), a significant percentage also chose to invest in ELSS via the SIP channel (38 percent). In contrast, 54 percent of investors over 40 chose the lump sum as their preferred mode of investing in ELSS.

“Although the lump sum is the preferred mode of investment, investors also go the SIP route to invest in ELSS funds, especially in the 25-40 age bracket. It is important to note that ELSS is like any other equity fund and investing periodically helps cultivate financial discipline and reap the benefits of average rupee costs, ” Harsh Jain said, co-founder and COO of Groww.

Here’s how you can invest in the mutual funds of an Equity Linked Savings Plan (ELSS):

People can invest in a savings plan linked to stocks, in the same way that they invest in mutual funds. First, determine your tax bracket and your taxable income. Second, in order to undergo proper KYC verification, make sure you have a recent photo, your PAN card with correct details, and valid proof of address.

Second, one can choose one’s favorite ELSS funds by comparing the consistency, returns and past performance of some of the best tax saving funds chosen by investors in recent months.

According to Groww, between the period January 2020 to March 2021, the main tax saving funds chosen by investors are as follows:

  • Long Term Equity Direct Plan Growth axis
  • Mirae Asset Tax Saver Fund Direct Growth
  • Aditya Birla Sun Life Tax Relief 96 Direct Growth
  • Canara Robeco Equity Tax Saver Direct Growth
  • Tata India Direct Growth Tax Savings Fund


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