Written by the Parayil team. 4 May 2026. 5 min read.
ELSS for tax saving: who still benefits under the new tax regime
How ELSS works, the three-year lock-in, how gains are taxed, and why it only saves tax if you file under the old regime.
The short answer
ELSS is an equity mutual fund with a three-year lock-in. Investments of up to ₹1.5 lakh a year qualify for a Section 80C deduction, but only for people who file under the old tax regime. Under the default new regime there is no 80C deduction, so ELSS is simply an equity fund with a lock-in.
Every January we are asked the same question: where should I put money to save tax before March? For many people the honest answer has changed in the last few years.
What ELSS is
An Equity Linked Savings Scheme invests mainly in shares, like any equity fund. Each investment, including each SIP instalment, is locked in for three years from its own date. That is the shortest lock-in among the Section 80C options.
The regime question
Since the new tax regime became the default, the 80C deduction applies only if you choose the old regime. If you have a home loan, high insurance premiums and other deductions, the old regime may still suit you and ELSS remains useful. If you file under the new regime, there is no tax benefit, and you may prefer an ordinary equity fund without a lock-in.
How gains are taxed
Gains on ELSS are taxed like other equity funds: long-term capital gains above an annual exemption are taxed at a flat rate. Rates were revised in the 2024 Budget, and we will check the current rules with you before you redeem.
A simple rule
Start ELSS as a monthly SIP in April rather than a lump sum in March. You spread your entry over the year and avoid a rushed decision in the last week of the financial year.
This guide is general information from Parayil Agencies & Financial Supermarket, a mutual fund distributor and insurance intermediary in Angamaly, Kerala. It is not personalised advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.