ELSS funds: Losing appeal but not utility

As investors explore the various tax-saving options in the Section 80C investment landscape, ELSS (equity-linked savings scheme) funds, also known as tax-saving funds, emerge as a standout choice. Not PPF, NSC or ULIPs, but ELSS. These tax-saving funds offer dual benefits, as they uniquely meld the growth potential of equity investing with the advantage of tax deductions under the old tax regime. While they come with a lock-in of three years, investors should look at ELSS funds as long-term investments and a critical contributor to their retirement corpus. Performance tale The category rebounded from a challenging period in 2022, showcasing an average outperformance of 3 per cent at the category level compared to the S&P BSE 500 index. Of the 35 actively managed funds, 26 outperformed the benchmark in the last calendar year, with the first half proving stronger than the second. Investor interest continues to dwindle Soon after last year's budget enhanced the appeal of the new tax regime, the June 2023 quarter experienced the highest outflows from the ELSS cate

This article was originally published on February 15, 2024.