What is ELSS Fund ?
5paisa Research Team
Last Updated: 28 Apr, 2025 05:50 PM IST

Content
- What is an ELSS Fund and Why Should You Consider It?
- What are the Features of an ELSS Fund?
- Who Can Invest in ELSS Funds?
- How Do ELSS Funds Help You Save Tax and Grow Wealth?
- Benefits of Choosing ELSS Funds for Tax and Wealth Growth
- Understanding the Taxation of ELSS Mutual Funds
- What Aspects Should You Consider Before Investing in ELSS Funds?
- ELSS vs Other Tax-Saving Investments: Which Is Better?
- What Options Are Available for Investment in ELSS?
- Conclusion
In the ever-evolving industry of personal finance, where new investment tools keep emerging and tax rules get updated almost every year, it’s crucial to stay informed to take right decision regarding investment.
ELSS funds can be an ideal solution for you if you are an investor looking to reduce your income tax liability and grow wealth over time.
But what is an ELSS fund, and why has it become one of the most talked-about tax-saving instruments in India? In this detailed guide, we’ll explore everything you need to know about ELSS funds in the simplest terms, so even if you’re not a finance expert, you will have detailed insights and confidence to make informed decisions.
More About Mutual Funds
- Advantages and Disadvantages of ELSS
- How to Plan Your ELSS Investments During the Year
- What is Passive ELSS?
- Does Mutual Fund Come Under 80C?
- Scheme Information Document (SID) in Mutual Funds
- What Are Tax-Exempt Mutual Funds & How Do They Work?
- Growth Mutual Funds Explained: Meaning & Types
- What Are Green Energy Mutual Funds?
- What are Fixed Income Mutual Funds?
- SIP vs SWP: Understanding the Key Differences & Benefits
- What is CAMS KRA?
- What is SIF (Specialised Investment Fund)?
- What Are Liquidity ETFs?
- Why Invest in ETFs Through SIPs?
- Difference Between ETFs and Stocks
- What is Gold ETF?
- Can We Pledge on Mutual Funds?
- Risks in Mutual Funds Investments
- Know How to Transfer Mutual Funds
- NPS vs ELSS
- XIRR vs CAGR: Understanding Investment Return Metrics
- SWP and Dividend Plan
- What is Solution Oriented Mutual Funds?
- Growth Vs Dividend Reinvestment Option
- Annual vs Trailing vs Rolling Returns
- How to Get Capital Gain Statement for Mutual Funds
- Mutual Funds Vs Real Estate
- Mutual Funds vs. Hedge Funds
- Target Maturity Funds
- How to Check Mutual Fund Status with Folio Number
- Oldest Mutual Funds In India
- History Of Mutual Funds In India
- How To Redeem ELSS Before 3 Years?
- Types of Index Funds
- Who Regulates Mutual Funds In India?
- Mutual Fund Vs. Share Market
- Absolute Return in Mutual Fund
- ELSS Lock in Period
- Treasury Bills Repurchase (TREPS)
- Target Date Fund
- Stock SIP vs Mutual Fund SIP
- ULIP vs ELSS
- Long Term Capital Gain Tax on Mutual Funds
- Smart Beta Funds
- Inverted Yield Curve
- Risk-Return Trade-Off
- Registrar and Transfer Agents (RTA)
- Mutual Funds Overlap
- Mutual Fund Redemption
- Mark to Market (MTM)
- Information Ratio
- Difference Between ETF and Index Fund
- Difference Between Mutual Fund and Index Fund
- Top 10 High Return Mutual Funds
- Passive Mutual Funds
- Passive Funds vs Active Funds
- Consolidated Account Statement
- Mutual Funds Minimum Investment
- What is Open Ended Mutual Fund?
- What is Closed End Mutual Fund?
- Real-Estate Mutual Funds
- How to Stop SIP?
- How to Invest in SIP
- What is a Blue Chip Fund?
- What is XIRR in Mutual Funds?
- What is a Hedge Fund?
- Tax Treatment of Long Term Capital Gains
- What is SIP?
- NAV in Mutual Funds
- Advantages of Mutual Funds
- Stocks vs Mutual Funds
- What is STP in Mutual Fund
- How Mutual Fund Works?
- What is Mutual Fund NAV?
- What are Mutual Funds?
- Mutual Fund Cut Off Time
- Mutual Fund the Best Investment Option for Conservative Investors
- Advantages and Disadvantages of Mutual Funds
- How to Choose Mutual Funds in India?
- How to Invest In Mutual Funds?
- How to Calculate NAV of Mutual Fund?
- What Is CAGR In Mutual Funds?
- AUM in Mutual Fund
- Total Expense Ratio
- What is XIRR in Mutual Funds?
- What is SWP in Mutual Fund
- How to Calculate Mutual Fund Return?
- Gold Mutual Funds
- Tax On Mutual Fund Investment
- The Top Benefits and Drawbacks of The Rupee Cost Averaging Approach
- How to Start a SIP Investment?
- What Is SIP & How does SIP Work?
- Best SIP Plans for Long Term: How and Where to Invest
- Best SIP Mutual Fund Plans
- ELSS Vs SIP
- List of Mutual Fund Managers in India
- What is NFO?
- Difference Between ETF and Mutual Fund
- ULIPs VS Mutual Funds
- Direct Vs. Regular Mutual Funds: What’s The Difference?
- ELSS vs Equity Mutual Fund
- NPS vs Mutual Fund
- Can NRIs Invest in Mutual Funds?
- Mutual Funds Categorisation In India
- Everything You Need to Know About Small-Cap Funds
- What is Public Provident Fund ?
- What is Large Cap Mutual Fund ?
- What is Index Fund ?
- What is IDCW in Mutual Fund ?
- What is Hybrid Fund?
- What is Gilt Fund ?
- What is ELSS Fund ?
- What is Debt Funds?
- What is an Asset Management Company - A Thorough Explanation
- What are Mid Cap Funds
- Liquid Funds - What are Liquid Funds?
- A Beginner's Guide to Investing in Fund of Funds Read More
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
Every investment in an ELSS fund comes with a lock-in period of 3 years. If you invest through SIP, each monthly payment is individually locked for 3 years from the date it was made. You won’t be able to withdraw or switch those units until the lock-in period is over.
ELSS funds mainly invest in stocks, so their returns depend on how the market performs and are not guaranteed. While there’s some risk involved, they can offer better long-term returns than traditional fixed-income options.
With a shorter lock-in period and the possibility of earning higher returns, ELSS appeals to investors who are comfortable taking on more risk. In contrast, PPF and NSC provide more security but come with fixed returns and longer lock-in commitments. ELSS is ideal for those aiming to build wealth over the long term while also benefiting from tax deductions.
An ELSS SIP is a Systematic Investment Plan where you invest a fixed amount regularly (monthly/quarterly) in an ELSS fund. It promotes disciplined investing while offering tax-saving and long-term wealth-building benefits.
You can invest in ELSS through SIP by selecting your fund, choosing the SIP option, setting an investment amount and frequency, and linking your bank account. You can do this via investment platforms or your demat account.
There is no single best ELSS fund, as it depends on your financial goals and risk tolerance. Look for funds with consistent long-term performance, experienced fund managers, and low expense ratios before choosing.
ELSS is a type of mutual fund that offers tax-saving benefits and has a 3-year lock-in. Regular mutual funds may not offer tax benefits and typically allow withdrawals without a fixed lock-in.
It’s advisable to invest in 2 to 3 ELSS funds to maintain diversification without overcomplicating your portfolio. Choose funds with different strategies or market caps for better risk management.
ELSS has the potential for higher returns than PPF due to its equity exposure and shorter 3-year lock-in. However, PPF offers fixed, tax-free returns and is better suited for conservative, long-term investors.
After the 3-year lock-in period, you can redeem your ELSS units partially or fully, or stay invested. There's no obligation to withdraw, and keeping the investment longer may yield better returns.
The lock-in period for ELSS funds is three years from the date of investment. You cannot withdraw or redeem the invested amount during this period. Each SIP installment has a separate 3-year lock-in.
ELSS funds invest in equities, so they are subject to market risk, economic fluctuations, and volatility. While they can offer high returns over time, short-term performance may vary significantly based on market conditions.
You can calculate ELSS returns online using mutual fund calculators. Enter your investment amount, duration, and expected rate of return to estimate the future value of your investment, including SIP-based projections