Tax-Saving Investments: Can ELSS Funds Maximize Your Returns?
It is important to maintain a good balance between investments that offer high returns and while saving tax. Equity Linked Savings Scheme (ELSS) funds are one such category of equity funds that offer you the dual benefits of high returns and tax savings. Read further to find out more about these ELSS mutual funds!
What Are ELSS Funds?
ELSS funds are equity-based schemes where the major portion (about 80%) of the corpus is invested in equity-based schemes, and these funds offer a tax exemption of up to Rs. 150,000 rupees under Section 80C of the Income Tax Act.
These funds have a lock-in period of three years, which is the lowest among the tax-saving instruments.
When you invest in ELSS funds, your corpus is spread across various large, medium, and small-cap companies.
Do ELSS funds Increase Wealth?
When you buy mutual funds such as ELSS funds, you might have different goals like wealth preservation or creation. So where do these ELSS funds fit, and do they help maximize returns?
The answer is yes because ELSS funds have a lock-in period and are great investment options for the long term while allowing you to save tax. Since you get tax exemptions under these schemes, your net returns after taxation are higher than other equity-based funds.
Below is a table that compares various tax-saving funds and their respective returns as of 2024.
Tax Saving Instruments |
Return on Investment |
Lock-in Period |
Equity Linked Savings Scheme (ELSS) funds |
10% – 30% |
3 Years |
Public Provident Fund (PPF) |
7.1% |
15 Years |
National Pension Scheme (NPS) |
9% – 12% |
Minimum 3 Years |
Sukanya Samriddhi Yojana (SSY) |
8.2% |
Locked until girls reach 18 years of age |
National Savings Certificate (NSC) |
7.7% |
5 Years |