ELSS
Full form: Equity Linked Savings Scheme
Tax & DeductionsELSS is a diversified equity mutual fund with 3-year lock-in qualifying for Section 80C deduction (up to Rs 1.5L/year). Shortest lock-in among all 80C investments. Returns market-linked, historically 12-15% CAGR.
In detail
Compare 80C options: PPF 7.1% (15-year lock-in), NSC 7.7% (5 years), ELSS 12-15% (3 years). ELSS is the only 80C option with market-linked returns. SIP in ELSS: each instalment has its own 3-year lock-in -- invest through the year, not just in March.
Formula
Tax saving = Rs 1.5L x tax ratenAt 30% bracket: Rs 45,000 immediate savingnNet effective cost = Rs 1.5L - Rs 45K = Rs 1.05L for Rs 1.5L deployed
Real-life example
🇮🇳 India example
Kiran invests Rs 1.5L in ELSS April 2022. Redeems April 2025. Returns at 15% CAGR: Rs 2.28L. Tax saved: Rs 45K. Net return on effective Rs 1.05L investment: 29.4% CAGR.
Frequently asked questions
ELSS vs PPF for tax saving? ▼
ELSS for market-linked growth. PPF for guaranteed debt allocation. Use both for different purposes in your portfolio.