How Does the 3 Year Lock-in of ELSS Compare to Other Tax Saving Instrument?

ELSS Save Taxes

ELSS Save Taxes

Investing is the smartest way to deal with surplus cash. Even for regular office-goers investing in a mutual fund scheme makes so much more sense because it increases their chances of creating wealth. Over the past years, mutual fund investment schemes have proven to fetch higher returns as compared to traditional investment options like Public Provident Fund (PPF) and Fixed Deposits (FD).

The hottest Mutual Fund Scheme in the market that is appreciated by old-school as well as rookie investors in Equity Linked Saving Scheme, widely known as ELSS. But why is it that majority of investors prefer a tax saving investment like ELSS over other 80C investment schemes, what are the ELSS tax benefits? Is ELSS’s lock-in period and rate of interest more favorable as compared to other 80C tax saving instruments?

The answer to all your questions is right here.

Below is a table comparing the lock-in period and interest rates of ELSS and other some tax-saving instruments that come under the Indian Income Tax Department’s 80C.

Particulars Equity Linked Saving Scheme (ELSS) Unit Linked Insurance Plans (ULIPs) Public Provident Fund (PPF) Bank Deposits


Lock-in 3 years 5 years 15 years 5 years
Interest rate Returns linked to market Returns linked to market 7.90% 5-7%

*interest rates mentioned in the table are of approximate value

Now that you have gone through the table, let us understand how each of above tax-saving instruments stand as compared to ELSS’s lock-in period and interest rate:


Unit linked insurance policy also known as ULIP is an insurance product that covers life insurance and also provides the benefits of equity investments. ULIPs not only provide life cover and tax-saving but also give you a chance to build your money over a longer time period. They have a lock-in period of 5 years and returns are purely subject to market performance.


Public Provident Fund PPF is a government investment scheme eligible for tax deduction under Section 80C of the Indian Income Tax Department. During the fiscal year, an individual can invest as low as Rs. 500 and as high as Rs. 1.5 lakh in a Public Provident Fund. Incentives derived from PPF are currently tax-free (compounded yearly) and come with a maturity period is 15 years.

Bank Deposits (FD)

Any amount of cash deposited in your bank’s fixed deposit with a tenure of five years qualifies for deduction under section 80C and the interest earned on it is taxable. Currently, banks are offering an interest rate of anywhere from 5% to 7%.


Equity Linked Saving Scheme or ELSS is a tax saving investment scheme that lets you save tax and at the same time gives you a chance to make some more money. ELSS invests in the equity market, hence it has a high risk but it provides high-interest rate too. An individual can claim returns worth Rs 46,800 maximum with an annual investment of up to Rs 1.5 lakh. Long term capital gains of Rs. 1 lakh and above derived from ELSS are eligible for 10% tax deductions.

Now that you are aware of how the lock-in period and interest rate of ELSS stand as opposed to other 80C tax saving instruments, planning on investing in ELSS? If so, one of the best ELSS scheme currently available in the market is a Long Term Equity Growth. So if you want to increase your chances of fetching a decent amount of returns from an ELSS investment and save tax at the same time, you should consider investing in Long Term Equity Growth fund scheme.


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