ELSS Vs SIP
5paisa Research Team
Last Updated: 11 Apr, 2025 07:08 PM IST

Content
- Introduction
- What is ELSS?
- What is SIP?
- 5 major differences between ELSS and SIP
- ELSS or SIP- which is better?
- Make The Right Selection and Reap Rich Dividends
Introduction
ELSS and SIP are the two most popular investment methodologies, followed by capital and secondary market investors. However, a quick scan of the definition would prove that the ELSS and SIP are fundamentally different. The following sections debunk all myths surrounding the ELSS vs SIP debate so that you can choose the best investment methodology for fulfilling your financial goals.
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Frequently Asked Questions
For first-time investors, ELSS funds are a good choice. Aside from tax advantages, these funds have the potential to provide better rates of return than other tax-saving choices under 80C.
ELSS mutual funds are the only type of mutual fund that is exempt from taxation under Section 80C of the Income Tax Act of 1961. You can receive a tax credit of up to Rs 1,50,000 per year if you invest in an ELSS. This allows you to save up to Rs 46,800 in taxes every year.
Tax deductions for ELSS funds are available up to Rs. 1,50,000, however they are not tax-free investments until they are redeemed. When ELSS funds are redeemed, long-term capital gains are incurred. However, there is an exemption for taxpayers up to Rs. 1,000,000 every fiscal year; beyond that, they are subject to a 10% tax rate (excluding cess and surcharge)
After ELSS fund investments are made through SIPs, the units purchased first will be redeemed first when the 3-year lock-in period is up. In other words, when the investor has held the units for at least three years, they may be redeemed on a first-in, first-out basis.