It’s time to go beyond just savings! Investing in an ELSS Mutual Fund offers the benefit of tax deductions and helps in wealth creation over time. It comes with a lock-in period of just three years making it one of the shortest among all tax-savings investments.
Enjoy tax savings benefits on investments made up to ₹1.5 Lacs under Section 80C of the Income-tax Act, 1961 along with market-linked returns (versus other 80C investments like PPF or FDs which are fixed income products).
Deduction can be claimed by investing in ELSS Mutual Funds U/s 80C up to ₹ 1,50,000/-
3 year lock-in ensures money remains invested for long term, without taking into account short term volatility in equity markets.
Lock-in period lower than other investment options like PPF, NSC or Tax Saving Bank FD’s
Investment can be made in lump sum or by way of SIP’s (Monthly) as small as ₹ 500/-
Income could potentially be earned by way of Income Distribution cum Capital Withdrawal (IDCW) or through capital appreciation based on the investor’s need
| Assume Gross Total Income for the year is | ₹ 12,00,000 |
| Investment in ELSS Mutual Funds | ₹ 1,50,000 |
| Income on which tax will be paid | ₹ 10,50,000 |
| Tax Saved on ₹ 1,50,000/- | ₹ 46,800* |
* Calculated as per income tax slabs under old tax regime for FY 2022-23 applicable for an individual assesse below the age of 60 with taxable income above ₹ 10 lakh but less ₹ 50 lakh. The calculation is inclusive of cess. The same is for illustration purposes only.
Investors should be aware that the fiscal rules/tax laws may change and there can be no guarantee that the current tax position may continue indefinitely. HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. In view of individual nature of tax consequences, each investor should seek appropriate advice.
| Investment | Risk Profile | Returns | Lock-in period | Tax on returns | Premature withdrawal |
|---|---|---|---|---|---|
| Equity Linked Saving Scheme (ELSS) | Equity Related | Market Linked | 3 Years | 10% LTCG on profits above ₹ 1 Lakh | Not allowed |
| Public Provident Fund (PPF) | Low risk | 7.1%* | 15 Years | No | Allowed, subject to conditions and limits. |
| National Pension Scheme (NPS) | Varies across plans depending on the underlying asset class | Market Linked | Till Retirement | Partially Taxable | Allowed, subject to conditions and limits |
| National Savings Certificate (NSC) | Low risk | 7.0%* | 5 Years | Taxable | No (Few exceptions) |
| Fixed Deposit (Tax saving) | Low risk | 6.25% ^ Varies across banks | 5 Years | Taxable | No |
| Unit Linked Insurance Plan (ULIP) | Equity Related | Market Linked | 5 Years | No | No |
* As of 01-Jan-2023 ^ Nationalised Bank: 5 Year Term deposit (Below ₹ 1 crore)
Just like any other mutual fund scheme, investment in ELSS can be done as lumpsum or via SIP i.e. Systematic Investment Plan, which makes staggered investing possible
Lumpsum: It is a one-time investment which can be made. There is no limit to the number of lumpsum investments however, investment must be in multiples of ₹500. Minimum investment amount under this scheme can vary across various Mutual Funds.
SIP i.e. Systematic Investment Plan: Every month/quarter a specific amount (decided by the investor at the start of SIP) is deducted from the investor’s bank account and invested in the chosen ELSS scheme. Minimum investment amount in this mode can be as low as ₹500/month.