How Do ELSS Tax Saving Mutual Funds Work?

ELSS funds pool money from investors to create a diversified equity portfolio. Professional fund managers invest this pool primarily in equity and equity-related instruments across market capitalizations. Each investment has a mandatory 3-year lock-in period, starting from the investment date. This lock-in gives fund managers the necessary time horizon to generate potential returns while ensuring investor discipline.

Key Factors:

• Investing primarily in equity and equity-related instruments
• Maintaining a mandatory 3-year lock-in period
• Offering potential capital appreciation over the long term
• Providing tax benefits under Section 80C of the Income Tax Act