Where should I invest money?

This is the one question that haunts each and every investor.

Investing your hard earned money in investment instruments calls for diligence and in-depth analysis.

Various factors like volatility, liquidity, returns, withdrawal and tax benefits need to be analyzed before selecting the right type of investment instrument.

On the taxation front, we have multiple schemes such as the National Savings Certificate (NSC), Public Provident Fund (PPF), Tax saving bank deposits, National Pension Scheme (NPS) and Equity Linked Savings Schemes (ELSS).

In this blog, we shall discuss ELSS and its benefits.

We will also cover how senior citizens should look at ELSS as an investment instrument.

Also read: SIP vs Lumpsum: Which is a better ELSS Investment?

Equity Linked Savings Schemes (ELSS)

ELSS is an equity oriented mutual fund that provides tax benefits subject to a maximum limit of Rs.1.5 lakhs per year.

The Central Board of Direct Tax has approved this scheme for the purpose of granting tax benefits.

Typically, the lock-in period for tax benefit instruments differ from five to fifteen years, but ELSS comes with a minimum lock-in period of only three years.

In addition to lower lock-in period, ELSS has historically given better returns than other eligible products.

The ELSS category has provided an annual return of 20.32% and 17.59% during the three and five years period ending in July 2018.

Choice of investing in ELSS

Since the money invested in ELSS ultimately gets invested in the equity market and as the equity market is known to be volatile in short run, it does not make sense to invest at one go (lump sum).

So, what should an investor do?

Unlike NSC and PPF, an investor should invest in ELSS over a period of time.

If one cannot enforce the discipline of investing regularly every month, it is advisable to invest through a monthly Systematic Investment Plan (SIP).

This ensures that the money gets invested automatically at a regular interval without one having to do anything.

SIP provides an auto-debit facility from the registered bank account.

Also Read: 8 Advantages and 2 Disadvantages of ELSS funds

Suitability of ELSS

ELSS may have some very good features, but still, they may not be suitable for each and every investor due to various reasons.

The returns on ELSS are not fixed and its performance is dependent on the performance of the underlying securities and the equity market.

Thus, ELSS is not suitable for a person who does not have an ability to take risk.

Who should not opt for ELSS funds?

1. Individuals who have retired and cannot risk their capital should ideally avoid ELSS as an investment instrument.

2. Senior citizens often tend to rely on a steady monthly income from their investments.

Due to psychological, or even financial factors, a senior citizen may be unwilling to take any risk.

A senior citizen will not have the confidence and ability to take risks because he/she may not be employed again.

Many senior citizens who have retired may not come under the tax bracket. So looking at ELSS from tax savings may not appeal to them.

Some of the top ELSS funds to consider are:

1.Aditya Birla Sun Life Tax Relief 96 – Direct – Growth

2.Axis Long Term Equity Fund – Direct – Growth

3.Franklin India Taxshield – Direct – Growth

To check out more ELSS funds, click here.


To conclude, we believe that ELSS is a good scheme to invest for taxation benefits.

But, for senior citizens, multiple factors such as liquidity, tax applicability on income, the requirement of funds, investment horizon and risk appetite comes to play.

A senior citizen should opt for ELSS only if they have a taxable income after retirement and also, the individual must have enough liquidity after investing in ELSS funds, as these funds will be locked-in for a three year period.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww