ELSS: Equity Linked Savings Scheme
ELSS (Equity Linked Savings Scheme) is a category of equity-oriented mutual funds that qualify for tax deduction under Section 80C of the Income Tax Act, with a mandatory 3-year lock-in period — the shortest among 80C instruments.
2 min read · Updated June 2026
Investment requirements: ELSS funds must invest minimum 80% of corpus in equity and equity-related instruments (per SEBI Mutual Funds Regulations). Open-ended, no maximum lock-in beyond 3 years per investment. Each SIP installment has its own 3-year lock-in counted from purchase date — so from a 12-month SIP, the last installment locks in 3 years from its date.
Tax treatment: Section 80C deduction up to ₹1.5 lakh per FY (combined across all 80C instruments). Available only under the old tax regime. Long-term capital gains (LTCG) on redemption after 3 years taxed at 12.5% beyond ₹1.25 lakh exemption per FY (effective from July 23, 2024 per Finance Act 2024). Short-term capital gains (not applicable since lock-in is 3 years) would be 20% (FY 2024-25 onwards).
Common ELSS schemes: Mirae Asset ELSS Tax Saver, Axis Long Term Equity, Quant ELSS Tax Saver, Parag Parikh ELSS Tax Saver, DSP ELSS Tax Saver, SBI Long Term Equity Fund. Direct plans have lower expense ratios (0.5-1.2%) vs Regular plans (1.5-2.5%) due to absence of distributor commissions. Direct plans are bought via AMC website, MF Utility, or platforms like Coin (Zerodha), Groww, Kuvera, ETMoney.
ELSS combines tax saving with equity exposure — historically the longest holding ELSS schemes have generated 12-15% CAGR over 10+ years, though past returns don't guarantee future. The 3-year lock-in is per installment for SIPs, not for the overall portfolio — meaning a 5-year SIP with 60 installments has 60 separate lock-in clocks running.
