ELSS — Tax-Saving Mutual Funds
Equity funds with a 3-year lock-in and the ₹1.5 lakh tax deduction (old regime).
Updated 30 September 2026 · SEBI rules as of 2026Overview
Equity Linked Savings Schemes invest at least 80% in equity and carry a mandatory three-year lock-in for every investment. Investments up to ₹1.5 lakh a year qualify for deduction under Section 80C of the 1961 Act — Section 123 of the Income-tax Act, 2025 from tax year 2026-27 — but only in the old tax regime.
| Particular | Details |
|---|---|
| Equity | ≥ 80% |
| Lock-in | 3 years from each purchase / SIP instalment |
| Deduction | Up to ₹1.5 lakh (old regime) |
| Tax on gains | LTCG 12.5% above ₹1.25 lakh per year |
| Minimum | Often ₹500 (SIP from ₹100–₹500) |
| Riskometer | Very High |
ELSS vs other tax savers
| Option | Lock-in | Return | Tax on returns |
|---|---|---|---|
| ELSS | 3 years | Market-linked | 12.5% LTCG above ₹1.25 lakh |
| PPF | 15 years | 7.1% (Jul–Sep 2026) | Tax-free |
| Tax-saver FD | 5 years | ≈5.5–7.75% | Interest taxable |
| NSC | 5 years | 7.7% | Interest taxable |
| NPS | Till 60 | Market-linked | Partly taxable |
SIP lock-in example
| Instalment | Earliest redemption |
|---|---|
| SIP on 5 Jan 2026 | Unlocks 5 Jan 2029 |
| SIP on 5 Feb 2026 | Unlocks 5 Feb 2029 |
| SIP on 5 Dec 2026 | Unlocks 5 Dec 2029 |
Tips
- Start SIPs in April instead of lump sums in March
- Choose one or two funds — not a new ELSS every year
- Continue beyond 3 years if goals are long-term
- In the new tax regime, compare with a regular flexi cap fund — the deduction no longer applies
Plan your investment
Frequently asked questions
Can I withdraw ELSS before 3 years?
No, not even partially (except on death of the investor).
Is ELSS useful in the new tax regime?
The deduction does not apply; it then works like a flexi cap fund with a lock-in.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Information is educational and may change with SEBI / tax rules — verify with the AMC, AMFI or SEBI. FinancePortal is not an investment adviser.