6 Things to Consider Before Choosing ELSS Fund

29 Oct 2021|

1 min read |

by ICICI Securities Team

Introduction

Tax planning is an essential aspect of financial planning. You should begin from April of every financial year and not indulge in a last-minute rush. Equity-linked tax savings schemes or ELSS mutual fund schemes are an excellent way to set aside a portion of your savings for the long term. You generate steady market-linked returns that help beat inflation and save tax at the same time.

Six parameters to consider before choosing ELSS fund

An ELSS fund refers to an equity-linked savings scheme, a specific variant of mutual funds that give dual benefits of tax savings and investment opportunities in equity mutual funds. Under Section 80C of the Income Tax Act of 1963, these funds provide tax savings of up to Rs 1,50,000 with a locked-in period of 3 years. ELSS funds LTCG are taxable up to 10% without indexation benefits.

Aside from these basic features, investors must carefully consider six parameters before choosing any particular ELSS fund. The six parameters for selecting the best ELSS fund are:

Before even choosing a particular ELSS, an investor must thoroughly investigate the fund house. To gain the maximum tax benefits, investors must choose an established fund house. They are experienced in handling significant investments, and the likelihood of any change in the return rate or the returns due to any external factor is much lower.
Another parameter to consider is the reputation and performance of the fund manager. Since the fund manager is responsible for investing the money invested by the mutual fund holder, it is crucial to consider and choose a fund manager with a good reputation.
The market cap of the ELSS is an essential factor. SEBI divides companies into large-cap, medium cap and small-cap categories. Large-cap companies are the most stable and better for long term investments. The medium cap is suited for flexible investments. Small caps are for those willing to take significant risks.
The size of returns and the size of the risk is linked, with higher risk investments having the possibility of greater returns. Investors must consider the risk and return ratio they might be comfortable in before investing.
Mutual fund returns can be annualised, trailing and calendar returns. Investors must decide which return type they require before investing in ELSS.
The expense ratio, i.e., the amount charged by the fund house for managing the capital invested by the investors. Investors must consider the expense ratio of any mutual fund, within ranges of 1.46% to 2.99%. Generally, an expense ratio that is low to moderate is recommended.

Additional Read: Is investing in Mutual Fund SIP really worth it

Conclusion

ELSS mutual funds present a relatively low risk, stable investment option. However, it is important that investors consider all the aspects of an ELSS before making their investment, in order to reap the maximum benefits possible from such an investment. ELSS aspects can be easily checked by an investor, since all such information is generally under public purview and thus accessible to the ordinary investor.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

ICICI Securities Ltd. is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. ICICI Securities Ltd. is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Mr. Atul Agrawal, Contact number: 022-69997051, E-mail address: complianceofficer@icicisecurities.com Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. ICICI Securities Ltd. and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. AMFI Regn. No.: ARN-0845. PFRDA registration numbers: POP no -05092018. ICICI Securities Ltd. acts as a Composite Corporate agent having registration number -CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and ICICI Securities Ltd. is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and ICICI Securities Ltd. is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

Did you enjoy this article?

54 people liked this article. Share Feedback

Recent Articles

View all

HOW TO TRADE GOLD IN COMMODITY DERIVATIVES MARKET IN INDIA

Gold is one of the world's most actively traded precious metals and is widely used for investment, jewellery and industrial applications. It is also considered a safe-haven asset during periods of economic or market uncertainty.

364 views

3 minutes

07 Sep 2026

Global Commodity Exchanges: NYMEX, COMEX & LME and Their Link With MCX

In this article, we’ll explore the three exchanges that matter most: NYMEX, COMEX, and the London Metal Exchange (LME) and their link with MCX.

536 views

1 minutes

31 Aug 2026

Mainboard IPO: Meaning, Eligibility and Key Benefits

Explore the meaning of a mainboard IPO, SEBI's eligibility routes, NSE and BSE listing rules, key benefits, and the checks investors should make before applying.

2 k views

4 minutes

13 Aug 2026