ELSS (Equity Linked Savings Scheme) 2026
The equity mutual fund with a tax deduction and the shortest lock-in among tax-saving options.
Rates for July–September 2026 (Q2 FY 2026-27) · Updated 27 September 2026What is ELSS (Equity Linked Savings Scheme)?
Equity Linked Savings Schemes are diversified equity mutual funds that must invest at least 80% in equities and carry a three-year lock-in. Investments up to ₹1.5 lakh qualify for deduction under Section 80C / 123 in the old tax regime. ELSS has the shortest lock-in of all tax-saving options, but returns are not guaranteed.
ELSS at a glance
| Particular | Details |
|---|---|
| Lock-in | 3 years from each purchase / SIP instalment |
| Equity allocation | Minimum 80% |
| Deduction | Up to ₹1.5 lakh (old regime) |
| LTCG tax | 12.5% on gains above ₹1.25 lakh per FY |
| Plans | Direct (lower cost) or regular; growth or IDCW |
| Regulator | SEBI |
Government-notified terms for July–September 2026 (Q2 FY 2026-27). Verify the latest notification before investing.
Features & benefits of ELSS
Suitable for long-term wealth creation.
3 years vs 5 (FD/NSC) and 15 (PPF).
Spread investments through the year.
Invest more than ₹1.5 lakh, though deduction is capped.
Eligibility — who can invest?
- Resident individuals, HUFs and NRIs (subject to country restrictions)
- KYC-compliant investors
How does ELSS work?
- Invest via lump sum or SIP.
- Units allotted at NAV; each instalment has its own 3-year lock-in.
- After lock-in, stay invested or redeem.
Tax benefits of ELSS
| Stage | Tax treatment |
|---|---|
| Investment | Deduction up to ₹1.5 lakh (old regime) |
| Long-term gains | 12.5% on gains above ₹1.25 lakh a year |
| IDCW (dividends) | Taxable at slab rate |
Section 80C of the Income-tax Act, 1961 is Section 123 of the Income-tax Act, 2025 from tax year 2026-27. Deductions apply only in the old tax regime.
Withdrawal, premature closure & maturity rules
| Situation | Rule |
|---|---|
| Within 3 years | Not permitted |
| After 3 years | Redeem any time; no exit load |
ELSS returns — worked examples
| Monthly SIP | Years | Assumed return | Estimated value | Invested |
|---|---|---|---|---|
| ₹12,500 (₹1.5 lakh/yr) | 10 | 12% p.a. | ≈ ₹29.0 lakh | ₹15 lakh |
| ₹5,000 | 10 | 12% p.a. | ≈ ₹11.6 lakh | ₹6 lakh |
Assumed returns — equity returns are volatile and not guaranteed.
ELSS calculator
How to open / invest in ELSS
- Complete KYC (PAN + Aadhaar).
- Choose an ELSS fund (direct plan for lower cost).
- Start SIP or lump sum via AMC website / platform.
Documents required
- PAN
- Aadhaar / KYC
- Bank account
Important forms
| Form | Purpose |
|---|---|
| Account statement | Proof for tax deduction |
Advantages & limitations
- Growth potential
- 3-year lock-in
- SIP flexibility
- Low minimum
- Market volatility
- No guaranteed return
- LTCG tax
- Deduction only in old regime
Mistakes to avoid
- Investing in March in one lump sum at a market high
- Redeeming automatically at year 3 without review
- Holding too many ELSS funds
ELSS vs other saving schemes
| Scheme | Rate | Tenure | Minimum | Tax |
|---|---|---|---|---|
| ELSS | Market-linked | 3-year lock-in per instalment | ₹500 (some AMCs ₹100 SIP) | Deduction; LTCG 12.5% above ₹1.25 lakh |
| NPS | Market-linked | Till 60 (can stay invested up to 85) | ₹1,000 per year (Tier I) | EET — partly tax-free at exit |
| PPF | 7.1% p.a. | 15 years + 5-year extension blocks | ₹500 per financial year | EEE |
| Tax Saver FD | ≈5.5% – 7.75% p.a. (bank-wise) | 5 years (lock-in) | ₹100 – ₹1,000 (bank-wise) | Deduction on deposit; interest taxable |
| NSC | 7.7% p.a. | 5 years | ₹1,000 | EET (reinvested interest deductible) |
Frequently asked questions
Is ELSS risky?
Yes. It is an equity fund; returns can be negative in the short term.
Is there a lock-in for SIP?
Yes, each instalment is locked for 3 years from its date.
ELSS or PPF?
PPF is guaranteed and tax-free; ELSS offers higher growth potential with risk and a shorter lock-in.
Information is for education and comparison. Interest rates are notified by the Government every quarter and scheme rules can change — confirm with India Post, your bank, EPFO or PFRDA before investing. FinancePortal is not a financial or tax adviser.