ELSS Funds Turned ₹1 Lakh into ₹5 Lakh: If you’ve been exploring ways to save on taxes while growing your wealth, you’ve probably come across ELSS (Equity Linked Savings Scheme) funds. These mutual funds not only help you claim deductions under Section 80C of the Income Tax Act, but also have the potential to deliver substantial long-term returns. In fact, some ELSS funds have turned ₹1 lakh into ₹5 lakh in just five years, making them a smart choice for savvy investors who want to grow their wealth efficiently while optimizing their tax liabilities.
In this article, we’ll uncover the ELSS funds that have delivered exceptional returns, explain how they work, and provide practical, easy-to-follow advice to help you get started with ELSS investing. Whether you’re a first-time investor or a seasoned pro, there’s something valuable in this guide for everyone.
ELSS Funds Turned ₹1 Lakh into ₹5 Lakh
| Feature | Details |
|---|---|
| Top Performing ELSS Funds | SBI Long Term Equity, HDFC Taxsaver, Quant ELSS Tax Saver |
| 5-Year Growth | ₹1 lakh grew to nearly ₹5 lakh (Quant ELSS) |
| Lock-In Period | 3 years (mandatory) |
| Tax Benefit | Up to ₹1.5 lakh under Section 80C |
| Best For | Long-term wealth creation + tax saving |
| Official Resource | AMFI India – ELSS Info |
ELSS mutual funds have proven to be a game-changer for Indian investors looking to strike a balance between tax planning and wealth generation. As shown by stellar performers like Quant ELSS and SBI Long Term Equity, these funds can turn modest investments into significant wealth over time. With a simple 3-year lock-in, flexible investment options, and the guidance of professional fund managers, ELSS can be a smart addition to almost any financial portfolio.
What Is an ELSS Fund?
Equity Linked Savings Scheme (ELSS) is a type of mutual fund that primarily invests in equities and equity-related instruments. These funds come with a 3-year lock-in period, which is the shortest among all tax-saving investment options under Section 80C. This makes ELSS an ideal option for individuals who want both capital appreciation and tax relief in the shortest time frame.
Unlike traditional tax-saving instruments like PPF (Public Provident Fund), NSC (National Savings Certificate), or fixed deposits, ELSS funds are market-linked. That means their returns are tied to the performance of the stock market, which allows them to potentially deliver higher returns over time.
For example, if you had invested ₹1 lakh in the Quant ELSS Tax Saver Fund in 2019, your investment could be worth ₹4.95 lakh by 2024, based on a remarkable 36.2% compounded annual growth rate (CAGR).
Over time, the compounding effect of returns reinvested can significantly enhance wealth, especially when compared to low-yield, fixed-income products. But with this potential comes a certain degree of risk, which investors should be aware of and comfortable with.
Why Are ELSS Funds So Popular?
There are several reasons ELSS has gained widespread popularity among Indian investors:
- Tax Savings: ELSS allows you to claim deductions of up to ₹1.5 lakh per financial year under Section 80C of the Income Tax Act, effectively reducing your taxable income.
- Shortest Lock-In Period: Compared to PPF (15 years), NSC (5 years), and tax-saving fixed deposits (5 years), ELSS offers the shortest lock-in period of just three years.
- High Return Potential: ELSS funds invest in the stock market, offering a chance for significantly higher returns compared to fixed-income instruments.
- Flexibility: You can invest a lump sum or opt for a Systematic Investment Plan (SIP), starting with as little as ₵500 per month.
- Professional Management: ELSS funds are actively managed by qualified fund managers who aim to outperform market benchmarks through careful stock selection.
Top ELSS Funds That Delivered Massive Returns
1. Quant ELSS Tax Saver Fund
- 5-Year CAGR: 36.2%
- Growth: ₹1 lakh became ₹4.95 lakh in 5 years
- Portfolio Focus: Invests in high-growth mid-cap and small-cap stocks
- Risk Profile: Aggressive, suitable for investors with higher risk tolerance
- Notable Feature: Agile and dynamic fund management style that adapts to market trends
2. SBI Long Term Equity Fund
- Fund Inception: 1993
- Since Launch CAGR: ~16.97%
- Long-Term Growth: ₹1 lakh invested at inception grew to ₹1.28 crore in 30 years
- 5-Year CAGR: 22.66%
- Fund Manager: Managed by seasoned professionals with decades of experience
- Notable Feature: Diversified portfolio across large-cap, mid-cap, and small-cap segments
3. HDFC Taxsaver Fund
- 25-Year CAGR: 20.45%
- Wealth Growth: ₹1 lakh invested in 1999 grew to over ₹1 crore
- 3-Year CAGR: 27.2%
- Risk Profile: Moderately aggressive with focus on long-term capital appreciation
- Historical Consistency: One of the most trusted and oldest ELSS schemes in India
How to Invest in ELSS Funds?
Step 1: Open a Mutual Fund Account
You can do this easily online through your bank, a financial advisor, or by visiting the fund house’s official website. Today, many platforms like Groww, Zerodha Coin, Paytm Money, and Kuvera offer seamless ELSS investment processes.
Step 2: Choose Direct or Regular Plan
- Direct Plan: Lower expense ratio, meaning more of your money is invested. Suitable for DIY investors.
- Regular Plan: Comes with distributor commission. Ideal for beginners who prefer personalized guidance.
Step 3: Select Growth or Dividend Option
- Growth Option: Profits are reinvested, allowing the power of compounding to work in your favor. Ideal for long-term wealth creation.
- Dividend Option: Periodic payouts offer cash flow but reduce the compounding effect.
Step 4: Decide Between SIP or Lump Sum
- SIP (Systematic Investment Plan): Allows you to invest a fixed amount at regular intervals, promoting financial discipline and rupee cost averaging.
- Lump Sum: Useful when you have idle funds or want to time the market during corrections.
Step 5: Complete KYC Process
Before investing, complete the Know Your Customer (KYC) process by submitting PAN, Aadhaar, address proof, and a photograph. This is mandatory for all mutual fund investments.
Step 6: Track and Review Your Portfolio
Once invested, monitor the performance of your ELSS funds using reliable platforms such as Moneycontrol and Value Research Online. Regular reviews ensure your investment remains aligned with your financial goals and risk tolerance.
Tips to Maximize Returns from ELSS
- Start Early: The sooner you start, the more time your money has to grow through compounding.
- Be Consistent: SIPs encourage disciplined investing and reduce market timing risks.
- Stay Invested Long-Term: Though the lock-in is three years, holding for 5-7 years or more can yield better results.
- Rebalance When Needed: Periodically check if your fund still matches your financial goals and risk profile.
- Diversify Your ELSS Portfolio: Don’t rely on just one ELSS fund. Spread your investments across different types of ELSS to reduce risk.
- Avoid Emotional Decisions: Market volatility is natural. Avoid panic selling and stay the course.
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FAQs About ELSS Funds Turned ₹1 Lakh into ₹5 Lakh
Is ELSS better than PPF?
Yes, if your goal is wealth creation. ELSS offers higher return potential than PPF but comes with market risks. PPF, on the other hand, is government-backed and offers guaranteed but lower returns.
Can I withdraw ELSS before 3 years?
No. ELSS funds have a strict 3-year lock-in from the date of each individual investment. Partial withdrawals or early redemptions are not allowed.
Are ELSS returns taxable?
Yes. Long-term capital gains (LTCG) above ₹1 lakh per year from ELSS funds are taxed at 10% without indexation benefits.
Can NRIs invest in ELSS?
Yes, NRIs can invest in ELSS funds, subject to specific KYC and FATCA norms. Some fund houses may have restrictions, so it’s best to confirm with the AMC.
What is the risk level of ELSS?
ELSS is considered moderately high to high-risk due to its equity exposure. However, the risk is often offset by the potential for high long-term returns.
How many ELSS funds should I invest in?
Ideally, you should diversify across 2 to 3 top-performing ELSS funds to balance risk and optimize returns.
