Is ELSS Still Worth It? The Truth About Investing in the New Tax Regime
Let’s be honest: for a decade, the only reason most Indians touched an Equity Linked Savings Scheme (ELSS) was to dodge taxes. You’d scramble in March, dump ₹1.5 lakh into a fund, and forget about it. But now that the New Tax Regime is the law of the land—and Section 80C is effectively a relic for most—is there any reason to keep your ELSS SIPs running?
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Actually, the answer is a surprising yes, but for reasons that have nothing to do with your tax return.
The “Discipline” Hack
In early 2026, we’ve seen some wild market swings. When the Nifty dips 500 points in a week, the first thing most people want to do is hit the “sell” button. ELSS stops you from being your own worst enemy.
The three-year lock-in isn’t a cage; it’s a guardrail. Because you can’t exit, you’re forced to ride out the volatility. Data from 2025 showed that investors who stayed for the full lock-in period had an 80% higher chance of seeing green compared to those who tried to time the market in regular flexi-cap funds.
Returns vs. The “Big Boys”
You might think that because ELSS is a “tax saver,” it’s somehow more conservative or slower than regular mutual funds. The numbers say otherwise. As of January 2026, many top-tier ELSS funds are actually outperforming standard Large-cap and Index funds.
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| Fund Category | 3-Year CAGR (2026 Data) | Best For |
| ELSS (Tax Saver) | ~15.9% | Forced long-term discipline. |
| Large-Cap | ~14.1% | Stability but lower upside. |
| Multi-Cap | ~17.8% | High growth but high emotional risk. |
The 2026 Reality: New Regime Logic
Under the 2026 rules, the Long-Term Capital Gains (LTCG) tax is 12.5% for gains over ₹1.25 lakh. Since ELSS funds are equity-heavy, they fall under this bracket.
Even without the 80C benefit, you’re getting a professional fund manager who is picking diversified stocks across sectors. Think of it as a Flexi-cap fund with a forced savings habit. If you struggle to keep your hands off your savings, ELSS is still the best “mental trick” in the book.
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