Definition of ELSS (Equity Linked Savings Scheme)
ELSS (Equity Linked Savings Scheme) is a type of equity mutual fund that qualifies for a tax deduction of up to ₹1.5 lakh per year under Section 80C of the Income Tax Act. It is the only mutual fund category that offers this tax benefit.
ELSS has the shortest lock-in period among all Section 80C investments — just 3 years. After 3 years, gains above ₹1.25 lakh are subject to LTCG at 12.5%. Because ELSS is primarily invested in equity, it has the potential to deliver higher returns than PPF or NSC over the long term, while also offering tax savings.
ELSS is ideal for tax-savers who also want equity exposure. However, since it's equity-linked, returns are market-dependent and not guaranteed. Always choose the direct plan of ELSS for maximum returns.