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Are ELSS Funds diversified equity funds

What's the difference between ELSS and diversified equity funds? Which category should we choose for example when both Principal Growth Fund and DSP BlackRock Tax Saver Fund gave 38.30 and 38.33% respectively in one year, almost equal returns for one year. Both funds are investing in equities and almost in the same companies? “If you want to take moderate risk, invest in the balanced fund. For high risk takers, diversified equity is always a better bet“, this is usual advice. Then what about the ELSS funds and the difference between the ELSS and diversified equity fund?

Mar 23, 2017 by Siva, Vijayawada  |   Mutual Fund

Please note that ELSS funds by design are diversified equity funds but kept in a separate category as ELSS funds offers tax rebate upto Rs 150,000 per annum under section 80C of the Income Tax Act 1961. Since ELSS Funds offer tax rebate, there is a lock-in period of 3 years from the date of investment.

Therefore, if you need to save taxes then only invest in ELSS funds else invest in diversified equity funds. Diversified equity funds are open ended funds and there is no lock-in as in case of ELSS Funds.

Hope the above clears your confusion between diversified and ELSS funds.

Thanks for writing to us.

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