Tax planning guides ELSS tax saver funds
ELSS Tax Saver Funds: Save Tax and Grow Wealth
An Equity Linked Savings Scheme (ELSS) is an equity mutual fund that gives a tax deduction of up to ₹1.5 lakh a year under the old tax regime, with the shortest lock-in among popular tax-saving options.
ELSS compared with other tax-saving options
| Option | Lock-in | Returns | Tax on returns |
|---|---|---|---|
| ELSS mutual fund | 3 years | Market-linked | 12.5% on long-term gains above ₹1.25 lakh |
| Tax-saver bank FD | 5 years | Fixed | Interest taxed at your slab rate |
| NSC | 5 years | Fixed (set by government) | Interest taxable |
| PPF | 15 years | Fixed (set by government) | Tax-free |
ELSS invests at least 80% in equities, so it carries market risk. The ₹1.5 lakh limit is shared with PF, PPF, life insurance premiums, home-loan principal and children's tuition fees.
SIP in ELSS: every instalment has its own lock-in
A SIP instalment made in January 2027 can be redeemed from January 2030; the February instalment from February 2030, and so on. Starting the SIP in April avoids a last-minute lump sum in March.
Old regime or new regime?
- New regime (the default): no ELSS deduction, but income up to ₹12 lakh is effectively tax-free (₹12.75 lakh for salaried individuals, after the standard deduction). ELSS still works as a long-term equity fund.
- Old regime: worthwhile if you also claim HRA, home-loan interest and other deductions. ELSS fills the ₹1.5 lakh limit with growth potential.
We compare both regimes on your actual income before recommending ELSS.
Common questions
Can I withdraw ELSS before 3 years?
No. Each unit is locked for 3 years from its purchase date.
Please note: This guide is investor education, not tax or investment advice. Figures are illustrations using assumed returns and are not guaranteed. Tax rules shown apply for FY 2026-27 (tax rules as of September 2026) and can change; please confirm your own situation with a chartered accountant. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.
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