Remember the days when ELSS (Equity Linked Savings Scheme) was the rockstar of tax-saving investments? People swore by it like it was the Netflix of mutual funds — locked in for 3 years, but with the hope of thrilling returns and tax relief under Section 80C.
Fast forward to 2025, and suddenly ELSS feels like that old Nokia phone — still functional, but hardly anyone’s first choice. The headlines are clear: ELSS tax benefits are fading, and investors are turning their backs on ELSS like Gen Z on cable TV.
- Remember the days when ELSS (Equity Linked Savings Scheme) was the rockstar of tax-saving investments? People swore by it like it was the Netflix of mutual funds — locked in for 3 years, but with the hope of thrilling returns and tax relief under Section 80C.
- 📉 ELSS: Once Hero, Now the Has-Been?
- 🚫 The New Tax Regime: No Love for ELSS Tax Benefits
- 💰 The Rise of Better Alternatives
- 📊 Numbers Don’t Lie, But They Sure Do Cry (For ELSS)
- 🤔 Why Did We Love ELSS in the First Place?
- 📚 A Quick Refresher: Old vs New Tax Regime
- 🕵️♂️ Who’s Still Holding On?
- 💡 What Should You Do Now?
- 😎 Final Words: Fashion Fades, Fundamentals Don’t
- 📌 TL;DR (Too Lazy? Read this!)
Let’s dive into the drama.
📉 ELSS: Once Hero, Now the Has-Been?
According to data from AMFI (Association of Mutual Funds in India), the ELSS category recorded net outflows of ₹1,616 crore in just the first quarter of FY26. For the entire previous year, ELSS schemes managed only ₹535 crore in net inflows, which is a sneeze compared to the ₹56,309 crore pumped into flexicap funds.
That’s not just a drop. That’s a full-on investor migration.
So what’s behind this ELSS exodus?
🚫 The New Tax Regime: No Love for ELSS Tax Benefits
Here’s the twist in the tale.
With the new tax regime gaining traction, investors are slowly realizing that ELSS tax benefits under Section 80C are no longer applicable. And let’s face it — a three-year lock-in isn’t fun when the reward (i.e., tax deduction) is missing.
Gautam Nayak, partner at CNK and Associates, nails it:
“Since there are no tax benefits available under Section 80C, these investors would not want to invest in ELSS schemes and lock in their investments for 3 years.”
Boom. That’s the heart of the issue. When the carrot is gone, why chase the stick?
💰 The Rise of Better Alternatives
Without the tax shield, ELSS has to compete purely on returns. And that’s where things get spicy.
People are now flocking toward options like:
- Flexicap Funds: ₹56,309 crore in inflows! That’s rockstar status.
- Public Provident Fund (PPF) and National Savings Certificates (NSC).
- Fixed Deposits (5-year tax-saving).
- And good old Systematic Investment Plans (SIPs) in diversified equity funds.
Why? Because these alternatives are:
- Not locked for 3 years (in some cases).
- Offering better liquidity and flexibility.
- Delivering competitive or better returns.
- Still aligned with either old or new tax-saving logic.
📊 Numbers Don’t Lie, But They Sure Do Cry (For ELSS)
Let’s break it down with a little heartbreak:
| Month | ELSS Net Flows (₹ Cr) | Net Equity Inflows (₹ Cr) |
|---|---|---|
| April 2025 | -372 | 24,269 |
| May 2025 | -678 | 19,013 |
| June 2025 | -556 | 23,587 |
The negative numbers under ELSS scream “Bye Felicia!”
Even though the Assets Under Management (AUM) for ELSS inched from ₹2.33 lakh crore to ₹2.49 lakh crore (a growth of 6.9%), the overall equity mutual fund market is flexing with a 22% jump — from ₹26.82 lakh crore to ₹32.69 lakh crore.
Clearly, ELSS is jogging while the rest are sprinting.
🤔 Why Did We Love ELSS in the First Place?
ELSS was the perfect hybrid: tax-saving meets wealth creation. It had:
- A short lock-in of just 3 years.
- Exposure to equities (with higher return potential).
- Tax deductions under Section 80C (up to ₹1.5 lakh).
- SIP options for disciplined investment.
In the old tax regime, ELSS made perfect sense. But the rules of the game have changed.
📚 A Quick Refresher: Old vs New Tax Regime
| Aspect | Old Regime | New Regime (2025) |
|---|---|---|
| ELSS Tax Benefit | Yes (Under Section 80C) | ❌ No Tax Deduction |
| Standard Deduction | Yes | Yes |
| Other Deductions (HRA, etc.) | Yes | ❌ Not applicable |
| Slabs | Higher, but with deductions | Lower, but without deductions |
In short:
New regime = simpler, cleaner, and deduction-free.
ELSS tax benefits = ghosted.
🕵️♂️ Who’s Still Holding On?
Let’s not declare ELSS dead just yet.
Some old-school investors are still riding out their 3-year lock-ins. And others, who have taxable income under the old regime, continue to sip their monthly ELSS SIPs to milk the Section 80C cow.
But the larger shift is undeniable.
💡 What Should You Do Now?
Here’s your witty, wisdom-packed checklist:
✅ Check your tax regime: Are you in the old or the new?
➡️ If old, ELSS still makes sense.
➡️ If new, better keep your money flexible.
✅ Look beyond tax benefits: Consider funds that grow your wealth — Flexicap, large-cap, multi-cap.
✅ Don’t lock-in out of habit: A 3-year lock-in without benefit? Might as well frame your money.
✅ Review existing ELSS: If it’s underperforming, consider exit after lock-in and redeploy.
✅ Diversify smartly: Don’t throw your entire ₹1.5 lakh into one ELSS just because your HR suggested it.
😎 Final Words: Fashion Fades, Fundamentals Don’t
ELSS had its day under the sun — and it truly deserved the praise. But in 2025, the ELSS tax benefit isn’t the siren song it used to be.
Flexicap funds are the new jeans — versatile, flexible, and trendy. ELSS? More like boot-cuts — nostalgic, but not your go-to anymore.
Still, it’s not the end. ELSS is still equity. It still has return potential. But with the new tax regime putting a full stop to its core tax-saving appeal, its popularity is… well… ELSS-ing away.
📌 TL;DR (Too Lazy? Read this!)
- ELSS tax benefits no longer apply in the new tax regime.
- ₹1,616 crore net outflows in Q1 FY26 — a huge shift.
- Flexicap funds, SIPs, and other options are stealing the show.
- If you’re still in the old regime, ELSS can work.
- Otherwise, stop investing on autopilot — review your financial wardrobe!
