Why ELSS deserve your attention during tax season!

25 Feb, 20242 mins read
Why ELSS deserve your attention during tax season!


Tax season can often feel like a headache, but what if it could be transformed into an opportunity for financial growth? Enter Equity Linked Savings Schemes (ELSS), your not-so-secret weapon for tax-saving and wealth-building. 

Power of ELSS

ELSS is a type of mutual fund primarily investing in equities and equity-related instruments. With a relatively short lock-in period of just three years, ELSS stands out among tax-saving investment options. Not only does it offer tax benefits under Section 80C of the Income Tax Act, but it also provides the potential for wealth creation through market-linked returns.

Why ELSS Should Be on Your Radar

  • Tax Benefits Amplified: ELSS offers substantial tax benefits, allowing investors to claim deductions of up to ₹1.5 lakh in a financial year under Section 80C. This translates to a reduction in taxable income, effectively lowering the tax burden on investors.
  • Flexibility with Short Lock-in Period: Unlike traditional tax-saving instruments like PPF or NSC, which come with longer lock-in periods, ELSS offers the flexibility of a three-year lock-in period. This means your funds can be accessed sooner, providing liquidity when needed.
  • Potential for Enhanced Returns: By primarily investing in equities, ELSS unlocks the potential for higher returns compared to conventional tax-saving options like FDs or PPF. Equities historically have outperformed other asset classes over the long term, offering the prospect of inflation-beating returns.
  • Systematic Investment Advantages: ELSS funds often provide the option of Systematic Investment Plans (SIPs), enabling investors to invest fixed amounts at regular intervals. SIPs promote disciplined investing and help average out the cost of investment over time, reducing the impact of market volatility.
  • Diversification: ELSS funds invest across a diversified portfolio of stocks, into various sectors and market capitalizations. This diversification helps spread the risk and ensures a more stable investment experience compared to investing in individual stocks.
  • Professional Management and Transparency: ELSS funds are managed by experienced fund managers who conduct in depth research and analysis to identify lucrative investment opportunities. Moreover, ELSS funds offer transparency through regular updates and disclosures, gaining investor confidence.

Other Points to Consider while buying ELSS Funds

  • Capital Gains Tax: While ELSS investments offer tax benefits during the accumulation phase, capital gains earned upon redemption are subject to Long-Term Capital Gains Tax (LTCG). However, gains up to ₹1 lakh in a financial year are exempt from tax.
  • Suitability and Risk Factors: Investors should assess their risk tolerance and investment objectives before allocating funds to ELSS. Equities offer the potential for higher returns, they also come with higher market risks compared to fixed-income instruments.


ELSS emerges as a compelling tax-saving investment avenue offering a combination of tax benefits, potential for higher returns, and investment flexibility. By including ELSS into your portfolio, you not only optimize tax savings but also tap into the growth potential of equities.

disclaimer: the information provided in this blog is for general informational purposes only. it should not be considered as personalised investment advice. each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. the examples provided are for illustrative purposes. past performance does not guarantee future results. data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. the content provided is neither an offer to sell nor purchase any security. opinions, news, research, analysis, prices, or other information contained on our blog services, or emailed to you, are provided as general market commentary. stack does not warrant that the information is accurate, reliable or complete. any third-party information provided does not reflect the views of stack. stack shall not be liable for any losses arising directly or indirectly from misuse of information. each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. all investing is subject to risk, including the possible loss of the money invested.

it’s time to grow your wealth

3 users1+ Lac investors are growing their wealth with Stack.
stack mb