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What is ELSS ?: Overview
ELSS or Equity Linked Savings Scheme mutual funds are a unique class of financial products that provide investors with tax benefits under Section 80C. Being mutual funds, they are offered by fund houses and are handled by experienced fund managers. Therefore, when you invest in an ELSS scheme, you get to invest in a professionally managed tax saving investment option.

Reasons to Opt for ELSS Mutual Funds

ELSS mutual funds have gained popularity in recent times as a result of the many benefits they offer over other 80C tax savings alternatives, such as PPF, NSC, life insurance, tax saving fixed deposits, Sukanya Samriddhi and more. Invest in best Elss Funds to get maximum returns in 2017. The following are the 6 key reasons why ELSS Mutual Funds are preferable to other tax savings investment alternatives.

  • Short Lock-in Period

By design, all tax-savings instruments have a lock-in period and withdrawal is not allowed during this period. Bank tax-saver FD and NSC a have a lock-in period of 5 years and 6 years respectively, while complete withdrawal of PPF can be performed only after 15 years with limited withdrawal benefits applicable after completion of 5 years.  In case of ELSS on the other hand, this lock-in period is just 3 years and you have the option of staying invested for a longer period if you so desire.

  • All-round Tax Exemption

In case of ELSS, the principal amount, the profit earned as well as the maturity amount itself is completely exempt from tax – this is commonly termed as EEE (where ‘E’ stands for exempt). This is not the case with NSCs, which are partially taxable at the time of withdrawal, while in the case of tax-saver FD, the interest earned is taxable as per the applicable tax bracket. As per current rules, PPF is the only other instrument in the tax savings category that offers EEE tax savings benefits similar to ELSS.

As per recent changes introduced in Budget 2018, LTCG (long term capital gains) tax is being implemented in case of ELSS as well as other equity investments too. At the time a tax saving mutual fund investor decides to liquidate his/her units, if total gains from equity schemes held for a year or more exceed Rs. 1 lakh, the incremental amount will be subject to a LTCG tax of 10% without indexation benefit. Additionally, a grandfathering clause has also been added for the benefit of investors. This clause states that all gains up to the limit of the ELSS NAV as on 31st January 2018 would be exempt from the new LTCG tax. However any gains above that limit are subject to the 10% tax rate over the Rs. 1 lakhs LTCG limit.

  • Systematic Investment Plan Option

In case of tax savings instruments such as tax-saver FD, only lump sum deposits are acceptable, while the number of transactions is limited to a maximum of 12 transactions in a year in case of PPF account. A system investment plan can be best described as a recurring deposit for mutual funds and you can start a SIP with an amount as low as Rs. 500 per month. Moreover, there is currently no limit on the number of SIP you can operate simultaneously or the amount invested in ELSS during a financial year. But do keep in mind that ELSS investments provide tax benefits only up to the prescribed limit of Rs. 1.5 lakhs as per Section 80C.

  • Choice between Dividend and Growth Option

In case of tax saving instruments such as tax saver FDs, NSC and PPF, you cannot get access to your deposits during the lock-in period. On the other hand, the investor has the choice of opting for the dividend option when investing in an ELSS. Thus, if the fund declares a dividend payout, the investor can get access to such profits even during the 3 year lock-in period and these dividend payouts are also tax-free. Alternately, you can opt for the growth option so that you can withdraw the amount investment plus profits as a lump sum after the completion of the lock-in period.

  • High Level of Transparency

If you invest in an ELSS fund, you can track the changes in your portfolio daily. Having this information can help you make educated decisions regarding changes that you can make to your existing portfolio in order to increase your ROI. This level of transparency is not available in case of any other tax saving investment option. Every ELSS scheme offers this option not just the best ELSS scheme.

  • Ease of Transaction

Among 80C tax savings instruments, only ELSS, bank tax saver FD and life insurance transactions can be made online from the comfort of your home or office. Other options like NSC, PPF, etc. require you to physically stand in a queue at an India Post Office or a bank branch. With the introduction of Aadhar-based e-KYC by leading fund houses operating in India, investing in ELSS has never been easier.ELSS funds are always better than other tax saving schemes think before investment to get better returns.

Table1. Comparison of select tax savings instruments across key criteria

Tax Savings Option

Lock-in Period (years)

Tax Applicability

Risk Level



No Tax


Life Insurance


No Tax



15 (partial withdrawal after 5 years)

No Tax



5 or 10 years

Interest Taxable


Bank Tax Saver FD

5 years

Interest Taxable


Considering the range of benefits that are offered by ELSS as mentioned above, it is only natural that ELSS investment is gaining popularity. However, it is important to note that ELSS mutual funds invest in equity market, therefore, they are subject to market risk. So make sure you perform thorough research before choosing an ELSS mutual fund to invest in.    

How to invest in ELSS through Paisabazaar.com

Investing in ELSS through Paisabazaar.com is extremely convenient as these transactions can be completed online. You just need to sign up for a free account online on the website and start investing right away. At the time of signing up, all the necessary documents for KYC and mandate purposes will be listed at the time of signing up. You can then send those to the address provided within 15 days for completion of KYC formalities. Once all the necessary KYC formalities are completed, Paisabazaar offer Ekyc for Mutual fund investment just need to fill Addhar card details and verify with the otp sent to your mobile. you can invest in ELSS mutual funds of your choice through our investment platform.

Some of the leading ELSS funds available to you through the Paisabazaar.com investment portal include DSP BlackRock Tax Saver Fund, Franklin India Taxshield, Birla Sunlife Tax Saver, Axis Long Term Equity Fund, ICICI Prudential Long-Term Equity, Reliance Tax Saver and many others. You can invest in these tax-saver fund options as well as many others without paying commissions on your purchases or profits. Additionally, you can also benefit from the expert advice provided by our in-house experts and make informed decisions regarding your tax saving investments.