Speaking of mutual funds investment in India, Equity Linked Savings Scheme (ELSS) funds remain a top pick for tax-saving investors. With increasing knowledge and better financial understanding, most investors choose ELSS over conventional options like PPFs or FDs. Let’s find out Why ELSS Funds Remain Popular for Tax Saving in 2025?
What is an ELSS Fund?
An ELSS fund is a type of equity mutual fund where minimum 80% of your holdings are put in equity or equity-based investments. What makes it stand out is that its tax-saving advantage under Section 80C, letting reductions up to ₹1.5 lakh per year.
(Reference: Income Tax Department – Section 80C)
Reasons Why ELSS Funds Remain Popular for Tax Saving in 2025
Here is why most investors in India still picking ELSS for saving money on taxes and wealth creation:
1. Shortest Lock-In Among Tax-Saving Options
- ELSS has a fixed lock-in timeframe of just 3 years, whereas PPF and NSC has 15 years and 5 years respectively.
- You can even continue with your investment after 3 years for long-term financial growth.
2. Potential for Higher Returns
- Acting as acquitted focused, ELSS funds have the possibility to generate higher returns than the convtentional investment options.
- Previous returns over the last 10 years have usually ranged from 12% to 15% per year, which depends on market ups and downs.
3. Tax Efficient
- Profits over ₹1 lakh are charged at just 10% long-term capital gains (LTCG) tax, which is comapratively low.
4. Flexible Investments
- You can invest in ELSS through limp sum amount or SIP mode, which start from as low as ₹500 monthly.
- SIPs helps you balance out market ups and downs.
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How to Choose the Right ELSS Fund
Picking the ideal ELSS is as crucial as your investment and here is how you can select smartly:
- Always look for fund with regular 5 to 10 years past performance.
- Check the experience and reputation of your fund manager.
- Compare the expense ratios from different funds, because lower the expense ratios higher can be the returns.
- Read the protfolio details carefully. Because some ELSS funds are more risk taking byt some are balanced.
- Make sure to invest only on your risk taking ability and financial goals.
It’s wise to match your ELSS with your best mutual fund portfolio strategy for 2025 to balance out the risks and returns.
(Learn more from AMFI India – Mutual Fund Basics)
Tips to Maximise ELSS benefits
- Start your investment at the beginning of the financial year to prevent last-minute rush.
- Try to choose SIPs to stay in discipline and build wealth over time.
- Examine the performance of your fund every year and make adjustments only if needed.
ELSS is a ideal option for you if you are discovering how to choose the right mutual fund in India that saves your money on taxes and grows wealth at the same time.
Conclusion
With a short holding period of your fund, high chances on returns, and tax benefits, ELSS is still leading in the field of mutual funds investment in India. If you still haven’t looked into this tax-efficient option yet, then 2025 is a ideal time to start exploring.