Are ELSS returns tax-free?

While ELSS (Equity Linked Savings Scheme) doesn't offer completely tax-free returns, it comes with attractive tax advantages under Section 80C of the Income Tax Act, 1961.

ELSS funds invest most of their money in stocks and similar investments, which exposes them to market risks. However, this also means they can make more money over a long period.  Investing in ELSS can be viewed with optimism, given the potential for significant tax benefits and the opportunity for long-term wealth creation.

Investing in ELSS offers a tax deduction of up to ₹1.5 lakh annually from taxable income under Section 80C. This deduction is a significant advantage, reducing investors' tax liability. 

Returns generated from ELSS investments are also treated as long-term capital gains (LTCG) if held for more than three years. Under current tax laws, LTCG from ELSS funds ELSS profits above ₹1 lakh in a year are taxed at 10%, and inflation isn't considered.

Despite the taxation on LTCG, ELSS remains popular. ELSS gives you tax benefits and the chance to make more money than other ways to save under Section 80C, like PPF or NSC. This popularity reassures investors about the soundness of their investment choice.