People invest their money to fulfil their investment goals. You may have long-term goals or short-term goals; you need to plan your investments accordingly. In addition to fulfilment of goals, some also invest with the objective of saving tax.

ELSS Mutual funds are one such investment type that helps you to achieve both. If you invest in ELSS funds, you can create wealth for your long-term goals as well as get tax benefits.

What exactly are ELSS funds?

Equity Linked Savings Scheme, a.k.a. ELSS Mutual Funds, is one type of diversified equity-oriented mutual fund scheme. The majority part of the ELSS funds is invested in the equity market. The rest would be invested according to the market situation, mainly in debt instruments.

These funds carry a lock-in period of 3 years. In addition, if you invest in ELSS Funds, you get the tax deduction benefit under section 80C of the ITA, i.e. the Income Tax Act, 1961. The maximum limit of the same is ₹150000.

Investment Options in ELSS Mutual Funds

ELSS funds are divided into three types. Let’s understand each of them.

  1. Dividend Option
    The dividend option of ELSS Funds gives you dividend income at regular intervals. If you want to earn regular income from your investment, then you can opt for this option.
  2. Growth Option
    When you invest in ELSS growth funds, you get the income at maturity. You don’t get a regular dividend income option. The investors gain by an increase in the NAV of funds at the time of redemption.
  3. Dividend Reinvestment Option
    ELSS allows a third option under which you can reinvest the dividend received in the same scheme again. This is mainly preferred by investors when the market is in a favourable situation.

Key Features of ELSS Mutual Funds

Let’s go through the key features of mutual funds

  1. Lock-In Period
    There is a lock-in of 3 years for ELSS schemes. You can’t withdraw the money invested in the scheme before 3 years. But compared to other tax-saving schemes like NPS, PPF, FDs, etc., the lock-in period of ELSS mutual funds is the shortest.
  2. Tax-Benefits
    ELSS mutual funds offer dual tax benefits. Firstly the investment in ELSS funds is eligible for tax deduction u/s 80C. Secondly, the long-term capital gains from ELSS funds are taxed at only 10 % if it exceeds ₹100000.
  3. High Returns
    Asset Management Company will invest a major part of ELSS funds in stock markets. Due to this, it gives higher returns.
  4. Diversification
    You shall never invest all your savings in a single bucket. You shall always have a diversified portfolio. By investing in ELSS mutual funds, you get the benefit of diversification.
  5. Expert Management
    The funds are managed by financial experts appointed by AMC. They have enough knowledge and carry an experience in managing funds.

How to Invest in ELSS Mutual Funds?

You can invest in ELSS mutual funds in two ways:-

  1. Online
    You can invest in ELSS funds online by visiting the AMC website, online platform, or the website or app of the broker. You will need to fill up the details and submit them. You can make use of various online options like UPI, net banking, etc., for online investment.
  2. Offline
    You can also invest in ELSS mutual funds offline through mutual fund distributors or by visiting the AMC office. You will need to fill out the application form, sign it and submit it. You can issue a cheque to pay the amount of investment.


ELSS mutual funds are an excellent way to diversify your portfolio and achieve tax benefits. It offers high returns and comes with a lock-in period. By investing in this mutual fund, you can create long-term wealth.

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