How do ELSS funds aid in tax saving and can they be pledged for F&O trading?
Equity Linked Savings Schemes (ELSS) are tax-saving mutual funds that invest primarily in equities. They qualify for deductions under Section 80C of the Income Tax Act, 1961—making them a dual-benefit option for both investment growth and tax saving.
While ELSS funds offer the potential for long-term capital appreciation, they come with a mandatory 3-year lock-in period. During this time, units cannot be redeemed or pledged. After the lock-in period ends, ELSS funds may be eligible for pledging as collateral for F&O trading—provided the specific fund’s ISIN is approved in FYERS’ collateral list.
Key highlights of ELSS funds
- Tax deduction: Up to ₹1.5 lakhs under Section 80C
- Growth potential: Primarily equity-based with long-term return prospects
- Lock-in period: 3 years from investment date
- Pledging: Allowed post lock-in, subject to eligibility under FYERS' approved list
What if...
| Scenario | Explanation |
|---|
| You want tax savings and market exposure | ELSS lets you save tax while investing in equities. |
| You need liquidity before 3 years | ELSS has a strict lock-in; funds can't be withdrawn or pledged early. |
| You want to pledge for margin | Wait until lock-in ends and check if the fund is in FYERS’ pledgeable list. |
| You plan staggered ELSS investments | Each SIP has its own 3-year lock-in cycle from the date of installment. |
Check the ELSS fund’s ISIN against FYERS’ list of approved pledgeable securities after the lock-in ends, if you plan to use it for margin trading.
Last updated: 16 Jun 2025
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