Equity linked savings schemes (ELSS), also known as tax saving funds, invest money in shares of companies of all sizes. Investment in ELSS up to Rs 1.5 lakh in a financial year brings in tax deduction along with other eligible investments under section 80C of the Income Tax Act. The ELSS units are subject to lock in of three years from the date of allotment. This is the shortest lock-in period among eligible tax saving investments.
There is no compulsion to sell the investments in ELSS after lock-in ends. Lock-in helps investors to ride out the volatile phases of stock market. Investors who regularly contribute to ELSS and hold for long period of time, see their money compound and end up with large corpus.