ELSS or Equity Linked Saving Schemes is falls under diversified equity mutual funds, where most of its corpus gets invested in equities. ELSS mutual fund has minimum lock in period of 3 years. Especially, when an investor chooses to invest through SIP or Systematic Investment Plan, the investments made by the investor gets locked for 3 years. Once 3 years of investment period is over, investor can choose to redeem the investment and sell units.
ELSS possesses traits of other equity funds, which means it comes with both, growth and dividend options. When the investment scheme ends, investor gets a lump sum in growth schemes. While in case of dividend scheme, investors gets regular payout as dividend income, throughout the lock in period. Best of all returns from an Equity Linked Saving Schemes or ELSS are tax free.
ELSS when compared to traditional or government tax saving instruments, such as National Savings Certificate (NSC), Bank FD (Fixed deposit) and Public Provident Fund (PPF) has lower lock in period. While ELSS fund gets locked for 3 years, the lock in period for FD is 5 yrs. and that for PPF is 15 years. On the other hand, NSC investment gets locked for 6 years.