ELSS Funds: Still Attractive?

In the ever-evolving landscape of financial investments, equity linked saving schemes (ELSS) were once a popular choice among investors looking for long-term wealth creation. But with the implementation of the new tax regime in India, are ELSS funds losing the sheen of providing dual benefits of tax deductions and capital appreciation? Vardan Pandhare explores the various intricacies in this story

- Vardan Pandhare

Despite the turbulence witnessed in the domestic stock markets, net investments in equity funds have persisted in a positive trajectory for the 31st consecutive month. However, in September, the inflow into equity mutual funds saw a decline of more than 30 per cent, amounting to ₹14,091 crore. The data also indicated that large-cap funds, in particular, continued to witness outflows. So, what does it say about ELSS mutual funds? Do they still hold the charm?

However, certain questions linger. How can your investment in ELSS mutual funds contribute to your long-term wealth creation goal? What sets it apart from other mutual funds? Our article will serve you as a guide to ELSS mutual funds. It will steer you through fundamental concepts and strategies and also explore the impact of the new tax regime on ELSS funds.

Understanding ELSS Mutual Funds

Equity linked saving schemes (ELSS) in the past few years were among the favoured mutual funds. They belong to the equity funds category, predominantly channelling investments into equities. Earlier, one standout feature of ELSS mutual funds was their eligibility for deductions on the invested amount, up to a specified limit under Section 80C of the Income Tax Act, but as the new tax regime got introduced, most of the tax-saving benefits went away. Another crucial aspect worthy of examination is the obligatory lock-in period of three years.