What is an ELSS?

As the name of the scheme very clearly suggests, it is a savings scheme that's linked to equity. And these are the two most important facts to remember even after investing in an ELSS. A savings scheme must necessarily be for the long term, so it's of no use looking at short-term returns from an ELSS.

ELSS is a mutual fund similar to any diversified equity mutual fund that routes your investments into equity markets. However, it stands apart from a regular mutual fund in one major way. ELSS carries a tax benefit on the amount invested, and therefore you have to lock-in your investment in an ELSS for three years.

Who can buy?

Section 80C of the Income Tax Act provides tax benefits to a person who buys units of ELSS, either in his own name or jointly.
Individuals, HUF

What is the minimum & maximum amount of investment?

Investments can be made through a systematic investment plan (SIP) or lump sum. When markets are volatile, SIP is a better way to invest, save tax and create wealth over a long term.

Minimum Amount of investment is Rs.500. There is no limit for maximum amount of investment; however the tax advantage is only up to Rs.1lakh.

Investments in ELSS plans are eligible for deduction from gross total income under Section 80C of Income Tax Act. Only Rs.1lakh of investments qualifies for tax benefits under the same section. Your gross income is reduced by the amount you invest in the scheme. If you are paying a tax of 30.9% you can save upto Rs.30, 900/- on an investment of Rs.1lakh or more in ELSS.

Tax Exemption twice in 6 years!!!

You can withdraw your Tax Saver Funds at the end of the 3 years and when you reinvest the same, you get Tax Exemption TWICE in six years compared to just once in the case of NSC.

On an investment of Rs 1,00,000 in the dividend plan of the ELSS, one gets a post-tax return of Rs 43,990 (Rs 33,990 plus Rs 10,000), or 43.99 per cent.