ELSS Mutual Fund – Best way to Save Tax and Generate Wealth

tax saving

It is a time to save tax. A Year is about to end. Your employer might have started collecting proof of Investment for Tax Saving. In case you have missed a bus of making an investment for tax saving, here is the Best Way to save tax and generate wealth. Yes, I am talking about ELSS. ELSS is a tax saving mutual fund that gives income tax benefit up to 1.5 lakh under section 80 C. ELSS has very good investment growth potential compared to a fixed deposit, NSC, PPF or Life insurance.

What is ELSS Mutual Fund?

ELSS stands for Equity Linked Saving Scheme. It is a mutual fund with lock-in period of 3 years. ELSS is tax saving cum investment instrument. The return given by ELSS is considerably high compared to any other tax saving instrument. You can very well beat inflation by investing your money in ELSS. The return comparison of ELSS with other tax saving investment options is given below.

ELSS Investment Options

Note – In above comparison Insurance endowment plan is taken with estimated return 6%.

For example purpose Reliance Tax Saver ELSS is taken. 5 year CAGR return of Reliance Tax Saver is 22.9%.

Read – Best ELSS Tax Saving Mutual Funds

From above table, it can be clearly said that –

  • Insurance and Fixed deposit either reduce your money or does not offer any growth.
  • PPF and NSC offer minor growth in the range of 1-3%.
  • ELSS is the only option that gives significant growth and tax saving.

Benefits of ELSS Mutual Fund

ELSS Mutual Fund offers following benefits –

  • Tax saving, wealth creation and an avenue for investment in equity.
  • ELSS is managed by a qualified fund manager.
  • Lock-in period for ELSS is only 3 years. It is less compared to any other tax saving instruments.
  • Investment via SIP route. This helps to reduce market risk.
  • One can start investing in ELSS with low amount i.e Rs.500.
  • ELSS also offers dividend option. Dividend payout is tax-free.
  • Some ELSS also offers free insurance coverage.

Recommended Post – ELSS Mutual Fund – Best Way to Save Tax and Generate Wealth

Best ELSS Mutual Fund option for Investment

Looking at above benefits and returns you must be excited to invest in ELSS. If it is the case here are Best ELSS Option for the Investment.

  • Reliance Tax Saver
  • Tata Tax Saving Fund Growth
  • Aditya Birla Tax Plan (Direct) Growth
  • DSP Tax Saver Fund (Direct) Growth
  • IDFC Tax Advantage Growth

Best ELSS Investment

Points to consider before investing in ELSS Mutual Fund

  • Only Individual and HUF taxpayers can claim tax benefit of investing in ELSS.
  • Maximum Tax benefit one can get via investing in ELSS is 1.5 Lac under section 80C.
  • Lock-in period under ELSS scheme is 3 years. One can redeem mutual funds after 3 years.
  • Any dividend payout during this three years or after that is tax-free.
  • No capital gain tax on withdrawal of money after 3 years lock-in period.
  • Maturity tenure of ELSS is very less 3 years compared to other tax saving investment options.
  • Investment via lump sum or SIP route is allowed.

Do you think ELSS is best tax saving investment option in India?

Do share your views and queries in the comment section.

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Article by Raviraj

Raviraj is the man behind moneyexcel.com. He is graduate in finance, engaged in blogging for 7 years. Moneyexcel blog is ranked as one of the Top 10 Personal Finance Blog in India. He is not affiliated with any financial product, service provider, agent or broker. The purpose of this blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.


  1. priya says:

    I have taken ELSS plan with SIP IN ICICI and now i want to invest 80 thousand at one shot in mutual fund.My aim is to invest and let it grow for 1 year or 2 yrs .so please suggest me which mutual fund i should choose and which scheme i should take.


    Can you explain that last column “post tax”. For mutual funds it says 16.90% how is that?

    • It is post tax return. In mutual fund tax is zero so whatever is final return by Mutual fund that will be taken in to account.Here I have taken example of Reliance Mutual Fund for understanding.

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