With returns no better than flexi-caps, ELSS faces an uncertain future

An ELSS as a tax-saving option is mostly preferred by younger taxpayers

Equity-linked savings schemes (ELSS) are staring at an uncertain future with the government pushing for the new income tax regime, which offers no tax deduction or incentive for investing in mutual funds (MFs). 

Beyond tax-saving benefits, fund houses highlight ELSS’ better return generation potential due to the compulsory three-year lock-in. Data, however, does not validate this claim, making ELSS a potential hard sell if the tax advantage is taken away.

A comparison of ELSS returns with those from similar categories, such as flexi-cap and large-cap funds, shows fund managers in recent years haven’t taken advantage of the lock-in period. In