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Best ELSS Funds 2026: Benefits, Tax Savings & Calculator

ELSS Funds also known as Equity Linked Savings Schemes are mutual funds that mainly invest in equities and found to have tax exemption under Section 80C of the Income Tax Act. Their lock-in period is compulsory, three years, and they are one of the shortest tax-saving instruments. ELSS Funds offer long-term benefits of greater market returns than traditional tax-saving investments, but are subject to market risks.

Whenever you have been searching about investments to save tax in India, you must have heard the term ELSS funds/ELSS mutual funds. But what is ELSS mutual funds? How do they work? And how can an ELSS mutual fund calculator help you plan your investments smarter? This guide answers all of that in simple language and naturally covers search queries like “what is ELSS funds”, “ELSS mutual fund full form”, and how to estimate returns using calculators.

What is ELSS Funds? (ELSS Mutual Fund Full Form & Basic Meaning)

Let’s start with the basics.

  • ELSS mutual fund full form: Equity Linked Savings Scheme
  • Type: Equity mutual fund
  • Key feature: Tax deduction is offered under Section 80C of the Income Tax Act
  • Lock-in period: 3 years (like PPF, FD, NSC, etc. it is the shortest among tax-saving options)

So when someone asks, “what is ELSS funds?”, the simple answer is:

ELSS funds are equity-oriented mutual funds that allow you to invest in the stock market while also saving tax under Section 80C, with a compulsory three-year lock-in.

These schemes are ideal for investors who want:

  • Long-term capital growth
  • Exposure to equity markets
  • And tax savings in one product

How Do ELSS Mutual Funds Work?

ELSS mutual funds collect money from many investors and invest mainly in stocks (equity shares) of listed companies across sectors like banking, IT, pharma, FMCG, infrastructure, etc.

Key points:

  • Enhanced portfolio typically invests at least 80% of the portfolio in equity or equity-related instruments.
  • Fund managers are busy in terms of changes in companies on the basis of growth prospects, valuations, and market environment.
  • The returns would be based upon the performance of the stock market and the management of the fund.

Due to the fact that ELSS funds are market-oriented, they are not assured of returns, yet in the past it could have been known to have higher returns than conventional fixed-income tax-saving products in the long-run.

Tax Benefits of ELSS Funds

One of the biggest reasons people search for “ELSS funds” or “ELSS mutual funds” is tax saving.

Here’s how the tax benefit works:

  • Investments in ELSS up to ₹1,50,000 per financial year are eligible for deduction under Section 80C.
  • You can invest more than ₹1.5 lakh, but the tax deduction limit remains the same.
  • The lock-in period is 3 years. You cannot redeem units before that.

What About Tax on Returns?

  • Dividends (if you choose IDCW option) are taxable in your hands as per your slab.
  • Capital gains:If you sell after the 3-year lock-in, gains are treated as long-term capital gains (LTCG). LTCG on equity above ₹1 lakh per financial year is taxed at 10% (plus cess, surcharge as applicable).

So ELSS gives tax benefit on the investment amount (80C) and potentially favorable taxation on long-term gains.

ELSS Funds vs Other 80C Options

Comparison of different tax-saving options, people usually look at:

  • ELSS funds
  • Public Provident Fund (PPF)
  • Tax-saving Fixed Deposits
  • National Savings Certificate (NSC)
  • ULIPs
  • NPS (though treated separately in many cases)

Here’s a quick perspective:

  • Lock-in: ELSS for 3 years; PPF for 15 years; FD/NSC for 5 years.
  • type of returns ELSS – market-sensitive (can increase or decrease); PPF/FD/NSC – fixed but reduced.
  • Liquidity: ELSS is redeemable after 3 years; others after a long time lock-in.

If your question is “what is ELSS funds best suited for?”, the honest answer:

ELSS mutual funds are best suited for investors who are comfortable with market volatility, want higher return potential over 5-10+ years, and also want to reduce their taxable income.

Types of ELSS Mutual Funds

Not all ELSS mutual funds are identical. They differ by:

  • Market cap focus (large cap, mid cap, multi-cap, flexi-cap)
  • Investment style (growth, value, blended)
  • Fund house philosophy

Some ELSS funds take a more aggressive approach with mid- and small-cap exposure, while others focus on relatively stable large-cap companies.

When you evaluate ELSS mutual funds:

  • Don’t check just one year’s performance, check past performance over 5-10 years.
  • Consistency vs benchmark should be looked-up (e.g., Nifty 500, Nifty 200, etc.).
  • Check expense ratio (lower is generally better, especially in direct plans).

ELSS Mutual Fund Calculator

You also mentioned “ELSS mutual fund calculator” as a target keyword – this is an important practical tool.

An ELSS mutual fund calculator typically lets you:

  • Enter a lump sum amount or monthly SIP
  • Select an assumed rate of return (e.g., 10-14% per annum)
  • Choose a time horizon (in years)
  • See the future value of your investment and wealth creation potential

For example:

  • If you invest ₹10,000 per month in an ELSS fund for 10 years
  • And assume an average return of 12% p.a.
  • The calculator will show you approximate maturity value and total capital invested.

This is especially useful if you are:

  • Planning to use ELSS not just for tax-saving, but as a systematic equity wealth-building tool
  • Comparing ELSS with other options like PPF or FDs over the same time horizon

You can find ELSS mutual fund calculators on:

  • Major mutual fund house websites
  • Popular investment platforms and brokers
  • Personal finance portals

Advantages of Investing in ELSS Funds

Let’s summarise why ELSS mutual funds are attractive:

  1. Dual benefit – Tax saving + equity growth potential
  2. Shortest lock-in among major 80C investments (3 years)
  3. Potentially higher long-term returns than FDs and small savings schemes
  4. SIP option – You can invest monthly instead of lump sum
  5. Professional fund management – Experienced managers handle research and stock selection

For many salaried people, ELSS becomes a simple way to automate both tax-saving and long-term investing through monthly SIPs.

Risks You Should Be Aware Of

However, ELSS is not risk-free.

  • Returns are market-linked, so NAV can fluctuate daily.
  • In the short term (3-5 years), equity can be volatile or even negative.
  • In case you get out at the end of the 3-year period and the market is down, you might not get good returns.

This is the reason why its long-term character (5-7 years or more) is the recommendation of many advisors to treat ELSS as a long-term product, although the statutory lock-in is only 3 years.

How to Choose the Right ELSS Mutual Funds?

  • Compare a 5-10 year track record, not only the latest 1-2 years.
  • Compare performance with benchmark and category average.
  • Prefer direct plans if you are comfortable investing via online platforms – they usually have lower expense ratios.
  • Look at portfolio style – is it overly aggressive or reasonably diversified?
  • Consider fund size and fund manager stability.

You can also use an ELSS mutual fund calculator to compare potential future values between different funds at different assumed return rates.

Who Should Invest in ELSS Mutual Funds?

ELSS is most suitable for:

  • Salaried people looking to save tax under Section 80C
  • First-time equity investors wanting a disciplined, long-term approach
  • Investors with a moderate to high risk appetite
  • People who can stay invested for 5+ years and are not shaken by short-term volatility

It may not be ideal for:

  • Extremely conservative investors who can’t tolerate market ups and downs.
  • Those who definitely need the investment back exactly after 3 years.

Conclusion

ELSS funds / ELSS mutual funds are one of the most efficient ways for Indian investors to save tax and participate in equity markets. They combine the power of compounding with equity exposure, while giving you a clear tax edge under Section 80C.

Also Read : Gross NPA vs Net NPA: Meaning, Key Differences, Formula.

FAQ'S

ELSS stands for Equity Linked Savings Scheme. It is a type of equity mutual fund that offers tax benefits under Section 80C.

ELSS funds are mutual funds that invest mainly in shares of companies. They help you save tax and build long-term wealth, but come with a mandatory 3-year lock-in.

The lock-in period is 3 years from the date of each investment. Units cannot be redeemed before that.

Yes, ELSS is equity-based, so it carries market risk. Over long periods, it can deliver higher returns than fixed instruments, but returns are not guaranteed.

You can claim a deduction of up to ₹1,50,000 per year under Section 80C. The actual tax saved depends on your slab.

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