ELSS: the 80C investment that also grows your wealth
Among all Section 80C instruments, ELSS stands out for two reasons: the shortest lock-in (3 years vs. 5–15 years for others) and the highest historical return potential (equity-linked vs. fixed rates for PPF, NSC, FD).
80C instruments comparison (2025)
| Instrument | Return | Lock-in | Tax on returns |
|---|---|---|---|
| ELSS | 12–16% CAGR (historical) | 3 years | 12.5% LTCG above ₹1.25L |
| PPF | 7.1% (fixed) | 15 years | Tax-free (EEE) |
| NSC | 7.7% (fixed) | 5 years | Slab rate on interest |
| Tax-saving FD | 6.5–7.5% | 5 years | Slab rate on interest |
| NPS (Tier I) | 8–12% (market) | Till age 60 | Partial tax-free on exit |
| ULIP | Variable | 5 years | Exempt if premium ≤ ₹2.5L |
How much tax does ELSS actually save?
If you're in the 30% slab and invest ₹1.5 lakh in ELSS:
- Tax saved: ₹1,50,000 × 30% = ₹45,000 (+ cess = ~₹46,800)
- This makes your effective investment cost: ₹1,50,000 – ₹46,800 = ₹1,03,200
- And the returns are on the full ₹1,50,000
Available only under the old tax regime. If you've opted for new regime, this deduction doesn't apply.
Top-performing ELSS funds (5-year CAGR as of 2024)
| Fund | 5-yr CAGR | Expense ratio |
|---|---|---|
| Quant Tax Plan | ~22% | 0.57% |
| Mirae Asset Tax Saver | ~17% | 0.49% |
| Canara Robeco Equity Tax Saver | ~16% | 0.59% |
| SBI Long Term Equity | ~16% | 0.72% |
Past performance is not guaranteed. Diversify across 2–3 funds for tax saving.