How an ELSS fund can help you with tax saving and wealth creation?

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Tax-saving investment avenues have always held a special place in the hearts of Indian investors. Among the various such schemes available in India, ELSS (Equity Linked Savings Scheme) funds have emerged as a popular choice as they offer the dual advantages of tax savings and potential wealth creation.

In this article, we will explore the world of ELSS mutual funds, analysing how they can be beneficial for tax-saving as well as wealth generation.

  • Table of contents
  1. What is an ELSS fund?
  2. Tax benefits of ELSS funds
  3. Wealth creation with ELSS funds
  4. How ELSS funds are helpful for tax saving

What is an ELSS fund?

Before we dive into the advantages of ELSS funds, it’s essential to understand what they are. An ELSS fund is a type of mutual fund that primarily invests in equities or stocks. However, what sets it apart is its tax-saving feature. Under Section 80C of the Income Tax Act, 1961, an investor can claim a tax deduction of up to Rs. 1.5 lakh on investments made in ELSS funds. This makes ELSS funds an attractive option for individuals looking to save on taxes while potentially growing their wealth over long term.

Tax benefits of ELSS funds

Section 80C deduction: As mentioned earlier, investing in ELSS funds allows you to claim a deduction of up to Rs. 1.5 lakh from your taxable income under Section 80C. This reduces your overall tax liability.

Long-term capital gains (LTCG) tax: ELSS funds come with a lock-in period of three years, which is one of the shortest lock-in periods among tax-saving investments. Any gains from ELSS funds held for over a year are considered long-term capital gains and are taxed at a rate of 10% if they exceed Rs. 1 lakh. This tax advantage could be a significant factor that can significantly enhance your corpus over time.

Wealth creation with ELSS funds

Apart from the tax benefits, ELSS funds offer wealth creation potential through equity investments. Here's how ELSS funds can help you generate wealth over the long term:

Equity exposure: ELSS funds primarily invest in equities, which have historically delivered a relatively better return potential over the long term compared to traditional fixed-income investments. This equity exposure can lead to wealth creation as your investment grows over time.

Systematic investment:ELSS funds allow you to invest systematically through SIPs (Systematic Investment Plans). This means you can invest a fixed amount at regular intervals, helping you harness the power of compounding over time. The phenomenon of compounding can lead to exponential gains for your corpus over the long term. Investors must note that the 3-year lock in period will be computed from each SIP instalment.

Professional management: Like other funds, even ELSS funds are managed by experienced fund managers who analyse market trends and select stocks to invest in. Their expertise can help you navigate the market efficiently, potentially leading to reasonable returns.

Diversification: Diversification is a key strategy for reducing risk in your investment portfolio. ELSS funds invest in a diversified portfolio of stocks, spreading the risk and potentially leading wealth creation over long term.

How ELSS funds are helpful for tax saving?

Now that we've discussed the wealth creation aspect, let's focus on how ELSS funds are beneficial for tax saving. The tax-saving benefits of ELSS funds are instrumental in reducing your overall tax liability, thereby enhancing your disposable income. This, in turn, can be redirected towards more investments or fulfilling other financial goals.

While ELSS funds offer an excellent opportunity for tax saving and wealth creation, it's essential to remember that all investments come with a degree of risk. It's crucial to consult a qualified financial advisor or distributor before making any investment decisions. These experts can guide you in choosing an ELSS scheme that aligns with your financial goals and risk tolerance.


ELSS funds are a good choice for those looking to save on taxes while also generating wealth. ELSS funds are a tax-saving investment with the potential to offer inflation-beating returns over long term. Their dual benefit of tax savings and equity exposure makes them a valuable addition to most investment portfolios. By making informed and well-planned investments in ELSS funds, you can navigate the path to wealth creation while enjoying tax advantages that help you keep more of your hard-earned money. Start your tax-saving and wealth creation journey with ELSS funds and consider speaking to a financial expert to make the most of this investment opportunity.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment.