Understanding ELSS Tax-Saver Funds

ELSS (Equity Linked Savings Scheme) funds are diversified equity funds that also qualify for a tax deduction of up to ₹1.5 lakh a year under Section 80C of the old tax regime.

Key features

• 3-year lock-in — the shortest among 80C instruments like PPF or NSC.
• Invested predominantly in equities, so returns track the equity market.
• Available as growth or dividend, direct or regular plans.

The lock-in works per instalment

If you invest through a SIP, each instalment is locked for three years from its own date — not three years from when you started. A SIP begun in January 2026 has its January instalment free in January 2029, its February instalment in February 2029, and so on.

One caveat on the new tax regime

Section 80C deductions are only available under the old tax regime. If you have opted for the new regime, an ELSS fund gives you no tax deduction — at which point it is simply a diversified equity fund with a three-year lock-in, and an open-ended flexi cap fund may suit you better.

How to compare ELSS funds

Because all ELSS funds share the same lock-in and tax treatment, comparing their 3Y, 5Y and 10Y CAGR within the ELSS category is a clean way to shortlist.