How to Earn Money Online: ELSS Investment
Tax-saving mutual funds with equity exposure and 3-year lock-in Discover proven strategies, expert tips, and actionable methods for earning money online, building passive income, and achieving financial freedom. Explore 360revenue's comprehensive guides and join our community of wealth builders and online entrepreneurs.
Key Requirements
Introduction
ELSS (Equity Linked Savings Scheme) funds are equity mutual funds that offer tax deductions under Section 80C while providing potential for higher returns through stock market investments. With the shortest lock-in period of 3 years among tax-saving instruments, ELSS funds combine wealth creation with tax planning. They invest primarily in equity markets, offering inflation-beating returns over long periods while providing immediate tax benefits.
Getting Started: Building Your Foundation
Complete KYC with any mutual fund company or investment platform
Choose between lump sum investment or SIP (recommended for rupee cost averaging)
Select ELSS funds based on track record, fund manager, and investment philosophy
Invest up to ₹1.5 lakh per financial year to maximize Section 80C benefits
Start early in financial year to benefit from full year of potential growth
Monitor fund performance but avoid frequent switching due to tax implications
Plan for 3-year lock-in and align with medium-term financial goals
Consider additional investments beyond tax-saving limit for wealth creation
Advantages
Tax deduction up to ₹1.5 lakh under Section 80C reducing taxable income
Shortest lock-in period (3 years) among all tax-saving investments
Potential for inflation-beating returns through equity market exposure
Professional fund management with research and diversification benefits
Long-term capital gains tax benefits after 1 year (10% above ₹1 lakh)
SIP option allows disciplined investing with rupee cost averaging
No tax on dividends received from ELSS funds
Can continue investing beyond tax-saving limit for wealth creation
Challenges
Market risk - returns can be negative in short term due to equity exposure
3-year mandatory lock-in period with no premature withdrawal option
Performance depends on fund manager skills and market conditions
Expense ratios reduce net returns (typically 1-2.5% annually)
No guaranteed returns unlike PPF or tax-saving fixed deposits
Tax implications on long-term capital gains above ₹1 lakh
Requires understanding of equity markets and fund analysis
Potential for underperformance compared to broader market indices
Pro Tips for Success
Start SIP early in career when in lower tax brackets for maximum compounding
Choose funds with consistent long-term performance rather than recent top performers
Diversify across 2-3 ELSS funds with different investment styles
Continue SIP even after achieving ₹1.5 lakh tax-saving limit for wealth creation
Compare expense ratios and choose direct plans for better returns
Stay invested beyond 3 years to benefit from long-term equity growth
Don't time market entries - SIP takes care of market volatility
Review fund performance annually but avoid frequent scheme changes
Plan ELSS investments as part of overall tax planning strategy
Consider step-up SIP to increase investment amount with salary growth
Common Mistakes to Avoid
Recommended Resources
SBI, HDFC, ICICI Prudential, Axis for ELSS options
Groww, Zerodha Coin, Paytm Money for direct ELSS investing
Related Earning Methods
Conclusion
ELSS funds offer the perfect combination of tax savings and wealth creation potential, making them essential for working professionals in higher tax brackets. The shorter 3-year lock-in compared to other tax-saving options provides flexibility while equity exposure offers inflation-beating returns over time. Success with ELSS requires patience, disciplined investing through SIPs, and understanding that short-term volatility is normal for equity investments. When used strategically as part of overall financial planning, ELSS can significantly contribute to both tax efficiency and long-term wealth accumulation.