Partner With Us NRI

Open Free Demat Account Online with ICICIDIRECT

6 Things to Consider Before Choosing ELSS Fund


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


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.


ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Mumbai - 400025, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism.

Please note that Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. I-Sec does not assure that the fund's objective will be achieved. Please note. NAV of the schemes may go up or down depending upon the factors and forces affecting the securities markets. Information mentioned herein is not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

The information provided is not intended to be used by investors as the sole basis for investment decisions, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific investor.The contents herein above shall not be considered as an invitation or persuasion to trade or invest. Investors should make independent judgment with regard suitability, profitability, and fitness of any product or service offered herein above. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

Most Popular

  • 13 May 2022
  • ICICI Securities

The Five-Point Financial Planning Checklist For Your Family

Whether you just got married or planning to have a baby or have dependents, you should have financial plans for every stage in your life to ensure a secured future for your family members. Here are five things you can do financially for your family.   

  • 12 May 2022
  • ICICI Securities

What is a Zero Coupon Bond?

You get fixed returns in the form of interest until maturity when you invest in a bond. Zero-coupon bonds work a little differently. In this article, find out what zero-coupon bonds are, their advantages and whether you should invest in them. 

  • 12 May 2022
  • ICICI Securities

What are Cross Currency Pairs?

The forex market is the largest financial market globally. Currency trading is a lucrative and booming business. While most currencies trading happens in relation to the US Dollar, some don’t. That forms the basis of cross currency pairs. Here’s what you need to know about it. 

  • 12 May 2022
  • ICICI Securities

Investing principles from Benjamin Graham: The Father of Value Investing

Benjamin Graham was a British born economist, professor, and investor who taught at Columbia University. He was also a mentor to some of the most famous investors of the 20th century, including Irving Khan, John Templeton, & Warren Buffett. Buffett called him "the second most influential figure in his life, only after my father". 

  • 12 May 2022
  • ICICI Securities

How to Invest in Nifty 50?

The Nifty 50 is the benchmark index of the National Stock Exchange. It represents the 50 largest companies listed in India. Investing in the Nifty 50 can be a good idea for those looking to make index-linked returns. Here’s how you can invest in the index. 

  • 12 May 2022
  • ICICI Securities

Investment philosophy of Cathie Wood: The most powerful woman on Wall Street

Catherine Duddy Wood, also called Cathie Wood, is an investor who primarily invests in disruptive technologies and is the founder, chief executive officer, and chief investment officer of ARK Investment Management, LLC, an investment management firm mostly active in the United States.

  • 11 May 2022
  • ICICI Securities

How to Use Technology to Improve Your Finances

Technology has made life simpler for everyone. In the realm of personal finance, technology has streamlined many processes—from budgeting to automating your payments. On National Technology Day, let’s look at how technology has transformed our finances. 

  • 11 May 2022
  • ICICI Securities

How to Invest in your Every Goal with Mutual Funds?

Each of us is unique. We have different needs and goals in life. Some of us can ride along swinging markets, while some may need a relatively conservative investment tool. 

  • 11 May 2022
  • ICICI Securities

Four Reasons Why Entrepreneurs should Invest in Equity Mutual Funds

Equity mutual funds provide growth opportunities not just for individual investors but also for entrepreneurs and corporates. They make excellent investments for anyone looking for wealth creation. This article will give you four reasons why businesspeople should consider investing in equity mutual funds.