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Equity Linked Savings Scheme

Introduction to ELSS

An Equity Linked Savings Scheme (ELSS) is a mutual fund equity scheme, that offers wealth creation over the long-term along with tax benefits under Section 80C of the Income Tax Act, 1961. ELSS also has a mandatory lock-in period of three years.

Benefits of ELSS

Your ideal tax saving investment

 

Save Tax under Sec 80C

*An ELSS fund can help you save as much as Rs. 46,800 in taxes per annum if you are in the 30% Income Tax bracket and invest Rs. 1.5 lakh per annum qualify. Investments in ELSS up to a maximum of Rs. 1.5 lakh per annum qualify for income deductions under section 80C of the Income Tax act. What this means is that you can deduct the amount you invest in an ELSS from your total income to reduce your taxable income and, therefore, your taxes.

*Under the old tax regime

Shortest Lock-in

ELSS has the shortest lock-in of all 80C investments – of just three years. Tax-saving FDs have a five-year lock-in and PPF has a 15-year maturity. Thus, ELSS allows you greater flexibility.

Wealth Creation

ELSS Funds have the potential for wealth creation over long run as they invest in equities, helping you achieve your long term goals

Ease of Investment

Investing in an ELSS is simple. You can put your money via a systematic investment plan (SIP) or as a lumpsum. You can continue holding your ELSS units after the 3-year lock-in.

Low Minimum Investment

You can invest with minimum Rs. 500/- and in multiples of Rs. 500/- thereafter

No Exit Load

No extra charges/fees to be paid on redeeming investment after 3 years

ELSS Vs Other Saving Schemes

Refer the below comparison table of various tax saving options for better understanding.

ELSS V/s Other Saving Scheme

PPF - Public Provident Fund, NSC - National Savings Certificate, FD – Fixed Deposit, ULIP – Unit Linked Insurance Plan. The above table is for illustration purpose only. Unlike PPF, NSC and Bank FD, investment in mutual funds is subject to market risks, hence, the performance may not be strictly comparable. PPF rate is effective for Jan-March 2025, Ministry of Finance (Govt. of India); NSC rate is effective for Jan–Mar 2025; 5 year SBI Bank FD rate is effective from 15/05/2024. Please consult your financial advisor before investing. Fixed Deposits offer Fixed Rate of Return, while mutual funds are market linked. Bank Fixed Deposits are relatively safer as they are covered under DICGC to the extent of INR 5 lakh per account.

Tax Saving Calculator

Maximum gross yearly income is `
`3,00,000`50,00,000
My investment in ELSS is `
`0 `1,50,000
`2500
`2500
`2500

*Disclaimer- These calculators are designed to be informational and educational tools only, and when used alone, do not constitute investment advice. We strongly recommend that you seek the advice of a financial services professional before making any type of investment. Applicable only to Individuals other than senior citizens/ super senior citizens.

Frequently Asked Questions about ELSS

What is ELSS?

ELSS or Equity Linked Saving Scheme is an equity mutual fund with the dual benefit of saving tax and wealth creation with a lock in period of 3 years. Investment in ELSS funds qualifies for deduction of upto Rs 1.5 lakh under Section 80C of the Income Tax Act.

How much tax can be saved by investing in ELSS?

It depends upon the tax bracket an investor falls in. In the highest tax bracket of 30%, if the investment in ELSS is Rs. 1,50,000 , investor can save upto 46,800*. Given the investments in ELSS are made in the equity markets, the returns are much higher than most investment options with tax saving benefits in the longer run.

Should my first mutual fund investment be in ELSS?

Yes, until you consume your saving limit of upto Rs. 1.5 Lac Rupees under section 80C, your investments in mutual funds can be in an ELSS fund.

How long should I stay Invested?

When you want to plan for long term goals, you should also stay invested for a longer period of time. The minimum period is 3 years. However, based on the different life goals you have in mind, investment for a span of 5-10 years is advisable.

In ELSS, do SIPs give better returns than lump sum investments?

It depends on the market conditions. If the volatility is high in the market, SIP will give better return than lump sum because you can buy units at a lower cost. On the other hand, if volatility is low in the market, SIPs will give lower returns than lump sum investments, because you will be buying units at a higher price.

Are returns on ELSS taxed?

After 3 years returns from ELSS will be taxed under Long term capital gain (LTCG) of 10% on aggregate gains exceeding 1 lakh per annum. For fresh investments on or after 23rd July 2024, LTCG of 12.5% is applicable (with an exemption up to Rs 1.25 lakhs)

This is an investor education and awareness initiative by PGIM India Mutual Fund. The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable.

The information is for general purposes only and not an investment advice. All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out directly to the AMCs. If they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SEBI SCORES portal at https://scores.sebi.gov.in/scores-home/.

*As per the present tax laws, eligible investors (individual/ HUF) are entitled to deduction from their gross total income, of the amount invested in equity linked saving scheme (ELSS) upto Rs. 1,50,000/- (along with other prescribed investments) under Section 80C of the Income Tax Act, 1961, under the old tax regime. Tax savings of Rs. 46,800/- shown above is calculated for the highest income tax slab. Long term capital gain and dividend distribution tax as applicable. Tax benefits are subject to the provisions of the Income Tax Act, 1961 and are subject to amendments, from time to time. © Prudential Financial, Inc. (PFI) and its related entities. PGIM, the PGIM logo, and the Rock symbol are service marks of PFI and its related entities, registered in many jurisdictions worldwide.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.