How ELSS funds will help you to make more money in 2019?

elss funds scheme

ElSS – Equity Linked Saving Schemes, is a type of equity fund, Elss funds are tax exempted under section 80C.  Lock in Period for Elss funds is 3 years. There are 17 ELSS schemes currently exist in India’s mutual fund market with more than 80,000 Crore worth assets under Management.

ELSS is a diversified equity mutual fund that invests in most of its corpus fund equity. Diversified means that the fund invests in the shares of organizations of different sectors sizes so that the diversities in the fund remain intact. Diversification provides more variety and increases our profit chances as all the companies did not go into the loss at the same, the lesser the risk will be.

Since it is an equity fund, Returns from ELSS Fund depends on the returns from the equity market how well the fund is performing. Expert fund managers can give you better returns than the market.

Understand here how to buy mutual funds and understand what are direct plans in mutual funds.

Why should one invest in an ELSS?

Why should one invest in an ELSS

  • Tax Benefit
  • Equity Benefit Potential for Higher Returns
  • Tax-Free Dividends
  • No Long Term Captial Gains tax
  • Lowest Lock-in Period(3 years)
  • Investment Amount:Min: Rs 1000 Max: Unutilized component of 80C



Savings in tax with investment in ELSS Mutual Fund Dividend and growth

Like all other Equity Mutual Fund schemes, ELSS also offers dividend and growth options. The lump sum amount will get by the investor at the of 3 years in the Growth option

On the other hand, is the dividend option, the Regular dividend is given to the investors, even during the lock-in period.

Lock in the period in ELSS Funds

There is a lock-in period of three years on the investment under this scheme, ie, when you invest in this scheme, you can not redeem your investment for three years. Since it is beneficial to invest only in long-term stock markets, in the next three years, you are likely to get a good return.

You can also choose SIP(Systematic Investment Plan) method to invest in ELSS funds, which makes investing easier and reducing the risk of investment.

Tax rebate

Equity Linked Saving Schemes

Under tax 80C of the Income Tax Act, the tax can claim as a deduction up to Rs 1 lakh of their ELSS investment from their gross total income in a financial year. Returns from ELSS scheme are completely tax-free.

Any other investment plans available for tax rebate such as bank deposits, NSC or PPF, ELSS is available with the lowest lock-in period.

ELSS is a great Mutual Fund investment scheme in the schemes available for investment, but the stock market is risked in the same way as the investment in the stock market, as the stock is in the market.


Features of Elss Funds

  1.  The investment will be in multiple of Rs 500, the minimum investment will be 500 rupees.
  2.  Transfers of ELSS units, pledge (to take a loan) can be done only after three years.
  3.  This plan will be open for a minimum of 3 months during a financial year. However, this aspect is not so important. Most ELSS schemes are open-ended schemes. It means you can invest whenever you want.
  4.  An ELSS fund has to invest at least 80% of the provident amount equity. One more thing to note is that at least 65% of the investment will be in equity.
  5.  There can be only one ELSS scheme in a mutual fund house. But you can see that some Fund houses have more than one scheme.
  6. If the investor died, the legal beneficiary can sell the investment but he/she need to wait for at least after the date of the allotment.

Therefore, if the investor dies after 5 months of purchase of the unit, then the nominated person will be given the units only. But the units will have to wait for 7 months to sell.

Note that nominated person can transfer them long ago but can not sell for one year. So, in the event of the investor’s death, the lock-in period is reduced from 3 years to 1 year.


Tips for Getting Better Returns by Investing in ELSS Funds

1) Investigate fund performance, Also, check the performance of the time of the ups and downs in the market.

2) The structure of the fund informs us that how the fund portfolio is divided into small, mid-cap and large caps. If the fund is mostly made of a giant or large cap, then it is considered a safe investment, but if the same is made of a small or mid-cap then it can be risky to make a choice.

3) Investors often get attracted by those funds that perform well that year and invest in these funds. Investing in a new fund every year is one of those mistakes that people often do.

4) Beta- It measures the fluctuation of the fund. The less beta the safer the funds will be.
Sharpe ratio – It measures the performance of the fund. The appearance of the good fund of as sharp as the ratio.

Comparison Between ELSS and Other Investment Securities-

Tax Advantage


  • ELSS fund invests the money in equity mutual fund, hence it contains risk but the returns are guaranteed.
  • ELSS is best for tax saving if your investment time is more than 5 years.
  • ELSS fund more beneficial when someone wants to invest as well as  tax saving.