ELSS funds are equity funds that invest a major portion of their corpus into equity or equity-related instruments. ELSS funds are also called tax saving schemes since they offer tax exemption of up to Rs. 150,000 from your annual taxable income under Section 80C of the Income Tax Act.
As the name suggests, an ELSS fund is an equity-oriented scheme with a mandatory lock-in period of three years. In recent years, many taxpayers have turned to ELSS schemes to avail of tax benefits. If you invest in ELSS schemes, then you can avail tax exemption of the invested amount up to a limit of Rs. 150,000. Further, the income that you earn under this scheme at the end of the three-year tenure will be considered as Long Term Capital Gain (LTCG) and will be taxed at 10% (if the income is above Rs. 1 lakh).