Mutual Funds · Category
Explore & investELSS (Tax-saving) Funds
Equity funds with a three-year lock-in that qualify for a tax deduction under the old tax regime.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
At a glance
- Who typically explores it
- Typically explored by taxpayers using the old tax regime who want their deductible investments to have equity exposure, and who are comfortable with three years of no access.
- Time horizon
- Three years minimum by rule; in practice, the usual five-plus-year equity horizon still applies.
- Volatility
- High, like other diversified equity funds. The lock-in means you cannot exit during a fall — a discipline for some, a constraint for others.
A general description of the category. Individual schemes differ — read each scheme’s documents.
Understand
01ELSS (Tax-saving) Funds
What ELSS funds are
An Equity Linked Savings Scheme (ELSS) is a diversified equity fund with two special features: a three-year lock-in on every investment, and eligibility for a deduction from taxable income under the old tax regime. Most of the portfolio is in equity, so it behaves like any diversified equity fund.
02ELSS (Tax-saving) Funds
How the lock-in works
Each purchase has its own three-year clock. With a SIP, every instalment unlocks separately.
For illustration: an instalment invested on 10 July 2026 can be redeemed from 10 July 2029; the instalment of 10 August 2026 unlocks a month later. Nothing obliges you to redeem when units unlock.
03ELSS (Tax-saving) Funds
The tax deduction
Under the old tax regime, ELSS investments count towards an overall annual deduction limit shared with other eligible items such as provident fund contributions and life-insurance premiums. The new tax regime — the default — offers no such deduction. The Income-tax Act, 2025 renumbered these provisions from 1 April 2026; the benefit itself continues under the old regime.
Some practical points:
- Check your regime first. If you use the new regime, an ELSS is simply an equity fund with a lock-in.
- The deduction is not the return. Gains on redemption are taxed like other equity funds.
- Tax is one input. A lock-in is only useful if the money would have stayed invested anyway. The fund, its risk and your plan matter more than the deduction.
- Avoid the March rush. Investing through the year via SIP spreads purchases and avoids rushed decisions.
Learn how investments are taxed or explore tax planning.
Ideas to know
How gains are taxed
ELSS (Tax-saving) Funds: tax in brief
Investments may be deducted from taxable income under the old tax regime, within the overall annual limit for such investments (₹1.5 lakh under current rules). There is no deduction under the new regime. Redemption gains are taxed like other equity funds. Tax rules change and depend on your circumstances. This is general education, not tax advice — check the latest provisions or speak to a tax professional.
Schemes in ELSS (tax-saving) funds
Live scheme data isn’t connected yet
Before you decide
Risks to understand
Market risk
Your money is in equities and can fall significantly in value.
Lock-in risk
You cannot redeem for three years from each purchase, even if your circumstances change.
Regime risk
If you move to the new tax regime, the deduction no longer applies, though the lock-in still does.
The riskometer, SIPs and common questions
Related
Plan for it
Other categories
Next step
Small decisions compound.
Model a SIP with your own assumptions, size the goal it’s for, or talk to a CompoundX expert about how this category fits what you already own.
Disclosures
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Past performance may or may not be sustained in future. Calculators and illustrations on this site use hypothetical assumptions; actual returns may differ.
[To be confirmed by Compliance] Mutual-fund onboarding, KYC and transaction execution are processed through the platform of our investment platform partner, AssetPlus. CompoundX provides education, tools and relationship management, and does not hold client money or units. Registration details, where applicable, are listed on our Disclosures page.
Partner: AssetPlus · Investment platform
CompoundX works with AssetPlus as its investment platform partner. When you choose to invest in mutual funds through CompoundX, account opening, KYC and transaction execution are processed through AssetPlus' platform, which connects to the asset management companies, registrars and other market infrastructure involved.
CompoundX provides the education, financial tools, goal planning and relationship management around those investments. CompoundX does not hold client money or mutual-fund units. [To be confirmed by Compliance]
Registration details for CompoundX and its partners, where applicable, are listed on our Disclosures page.
Risk disclosure
Market-linked investments involve risk, including the possible loss of the amount invested. Past performance does not indicate future results, and the value of investments and the income from them can go down as well as up.
Deposits, bonds and other fixed-income products carry credit, interest-rate and liquidity risks; returns depend on the issuer honouring its obligations. Insurance is a contract of protection, not an investment. Read every offer document, scheme information document and policy wording carefully before you decide.