ELSS (Equity Linked Savings Scheme) funds are a kind of mutual funds that qualifies for tax deductions under Section 80C of the Income Tax Act. Investing in ELSS brings you better returns compared to other investment schemes in terms of having a minimum period of 3 years of a lock-in period as the returns that are generated are just partially taxable. ELSS is also subject to long-term capital gain tax at 10%.

If you are looking for a long term financial goal, then this kind of scheme will help you save on taxes. Depending on the market performance for the duration of the investment, you would get returns accordingly. But if you are not tolerant of high risks then you should think about your choices as ELSS funds invest mostly on stocks. As ELSS have a 3 year lock-in period you wouldn’t be able to redeem the money within that period, so while choosing a scheme, you would have to choose wisely. ELSS gives you the flexibility to invest in large, mid and small cap stocks. It’s up to the investor to choose the kind of stock he wants to invest in.

Additional Reading: Investments with Tax Benefits