How to Select the Best ELSS Funds

What is ELSS?

ELSS stands for Equity Linked Saving Scheme, also known as Tax saving mutual funds. The investment made in the Best ELSS Funds is equity-linked and made in equity-related instruments.

Furthermore, ELSS Funds are eligible for an annual tax deduction of up to 1.5 lakh on investment, saving up to Rs. 46,800 in taxes each year.

As the name suggests, ELSS Funds are mostly equity-linked and have a mandatory three-year lock-in period. LTCG (Long Term Capital Gains) are taxable at a rate of 10% on returns exceeding Rs.1 lakh.

Features of ELSS Funds

ELSS funds have some inherent features that make them an ideal investment option for investors and must be kept in mind before investing in the Best ELSS Funds

Listed below are some noteworthy features –

– Investments made in ELSS funds are mostly equity-linked; hence 80 percent of the corpus is invested in various equities-related instruments.

– ELSS Mutual Funds offer their investors the shortest lock-in period, i.e. Three years. However, investors cannot liquidate their units until the completion of the lock-in period.

– The Best ELSS Funds are designed according to investors’ risk appetites and satisfy specific investment objectives.

– ELSS Funds are open-ended in nature and do not have an upper limit to the investment duration.

– Investments made in the Best ELSS Funds also have no upper capping to the investment amount; however, the minimum investment amount varies from one fund house to another.

ELSS Funds qualify for a tax deduction on investments of up to 1.5 lakh saving up to RS. 46,800 on taxes yearly under Section 80 C of the Income Tax Act

– The Long term Capital Gains made through ELSS funds are tax-exempted up to Rs.1, 00,000. Gains made over and above this threshold are taxed at 10 percent.

How to select the Best ELSS Funds 

ELSS funds are an effective way for people to build wealth whilst saving money on taxes. However, determining the best investment schemes can be difficult, and a lot goes into choosing the Best ELSS Funds.

Listed below are pointers on how to select the Best ELSS Funds


Investor Profile 

ELSS Fund investments are equity-linked, which makes them vulnerable to market fluctuations. This is why, before investing in ELSS Funds, investors should carefully consider their risk-taking capacity and assess the health of their existing portfolio. If an investor’s present portfolio is already heavily weighted in equity products, or if their risk profile is unable to support equity investments, there is no benefit to investing in ELSS Funds. The best investments are those that are compatible with the investor’s entire portfolio.


Expense Ratio 

The Expense Ratio is the charges imposed by a mutual fund scheme against the maintenance and operation of the funds. The smaller the charge, the more profit investors will likely make. Lower expense ratios are linked to higher take-home returns. This is why comparing the various ELSS investment options is a good idea. Investors should check to see if the fee they’re paying is in line with industry standards and benchmarks.


Fund History 

Although a fund’s previous performance does not guarantee future performance, it is always cautious to review it before investing. Fund houses with an efficient fund history determine the fund house’s management capabilities. An efficient fund history indicates that the ELSS fund is well-managed and free of compliance concerns.


Professional Recommendation 

Investing in the Best ELSS Funds can be difficult for someone who isn’t familiar with the equity markets. There are simply too many options to choose from, making things more difficult for an inexperienced investor. The ELSS Calculator can help investors calculate potential tax savings based on their investment volume, but finding the right scheme is a completely different story. Certified wealth management specialists have the tools needed to assess schemes based on qualitative and quantitative criteria and determine which one fits best according to the investor’s risk profile.



There you have it, “How To Select The Best ELSS For You“. Let us know your thoughts about this post by replying in the comments section. Also, check out our post on ” How to Select the Best SIP Plan to Invest in 2022“.