Saving taxes while building long-term wealth is a top priority for many investors, especially as financial planning becomes more goal-oriented. Among the various instruments available, Equity-Linked Savings Schemes (ELSS) have gained popularity for striking the right balance between tax efficiency and capital growth. ELSS is a type of mutual fund that combines the growth potential of equities with tax deductions under Section 80C of the Income Tax Act. In this article, we’ll walk you through the process of investing in the top ELSS funds.
What Are ELSS Funds?
An ELSS fund is a type of mutual fund that mostly puts capital into stocks and other similar securities. An ELSS mutual fund allows you to save taxes as well as generate wealth. However, you are required to lock your ELSS funds for three years and cannot withdraw them during that period. This lock-in encourages investment discipline and offers tax benefits
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29 May 2025
Key Features of ELSS Funds
The following are the key features of ELSS funds:
- Tax Benefits: Investments up to ₹1.5 lakh in ELSS qualify for deduction under Section 80C.
- Lock-in Period: ELSS has a lock-in of 3 years, meaning you cannot redeem your units before this period.
- Equity Exposure: ELSS funds invest at least 80% of their assets in equities, offering potential for higher long-term returns.
- Option to Invest via SIP: Systematic Investment Plans (SIPs) allow you to invest small amounts regularly, reducing market timing risk.
- Online Accessibility: These funds can be purchased easily through mutual fund platforms, mobile apps, or directly via AMCs (Asset Management Companies).
How to Invest in ELSS Funds Online: Step-by-Step Guide
Investing in the ELSS funds online is quick and hassle-free. Follow these steps:
1. Select a Trusted Platform
Choose a mutual fund website or an app and download it from the Google Play Store or the Apple App Store. Install the app on your smartphone.
2. Complete KYC
Complete the Know Your Customer (KYC) process by submitting the required documents such as your PAN card, Aadhaar card, and a passport-sized photograph. Most apps allow you to complete KYC online.
3. Choose Investment Mode
Decide how you want to invest:
- SIP (Systematic Investment Plan): Ideal for long-term financial discipline and rupee cost averaging, making it especially suitable for investors looking to start with smaller, regular investments.
- Lump Sum: It is suitable when you have a larger one-time amount
4. Select the ELSS Fund
Once your account is set up, navigate to the mutual funds section and search for ELSS funds. You can filter the funds based on various criteria such as past performance, fund manager expertise, and risk profile.
5. Make the Payment
Enter the amount you wish to invest and complete the payment process using your preferred payment method. The app will guide you through the steps to finalise the transaction.
6. Track Your Investment
Keep yourself updated with financial news, reports, and fund updates through an ELSS app. Regularly review your portfolio and make adjustments as needed to stay aligned with your investment goals.
Things to Keep in Mind Before Investing in ELSS Funds
Before starting your ELSS investment journey online, it’s important to be aware of certain critical factors that can influence your decision and long-term outcomes. While ELSS funds offer tax-saving benefits and growth potential, they also come with associated risks and restrictions.
1. Market Risk
ELSS funds invest predominantly in equities, which are known for their potential to generate higher returns but also for their volatility. This means your investment value can rise or fall based on market performance. Unlike traditional tax-saving instruments like PPF or FD, returns from ELSS are not assured.
2. Understand Lock-in Period
ELSS comes with a mandatory lock-in period of three years. This means you cannot redeem your investment before the completion of three years from the date of each investment. If you choose to invest through a SIP (Systematic Investment Plan), each monthly instalment is treated as a separate investment and will have its 3-year lock-in period.
3. Long-Term Investment
Although the lock-in period is only three years, it is advisable to hold ELSS investments for at least five to seven years. Equity markets are known to fluctuate in the short term, but they tend to reward long-term investors. Holding ELSS funds for a longer duration allows the investment to compound and smooth out short-term volatility.
Conclusion
Investing in ELSS funds online is a smart way to save tax and grow wealth over time. With platforms like Tata Capital Moneyfy, the entire process from KYC to selecting top-rated ELSS funds is quick, secure, and hassle-free. Just choose the right fund based on your goals, start with SIP or lump sum, and track your progress. ELSS is not just a tax-saving tool but also a gateway to disciplined, long-term investing. Start early, stay invested, and let the power of compounding work in your favour for future financial stability.
