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Equity-Linked Savings Scheme (ELSS) and Systematic Investment Plans (SIPs) are the first things that come up in our mind when we come across mutual funds. However, one cannot arguably compare the two as ELSS is an investment vehicle in itself while SIP is a way of investing in ELSS or any other mutual funds. We have covered the following in this article:

1. What is ELSS?

Equity-Linked Savings Scheme (ELSS) is a popular tax-saving investment covered under Section 80C of the Income Tax Act, 1961. ELSS is one of the few equity-oriented schemes that offer tax deductions. Taxpayers are eligible to claim tax deductions of up to Rs 1,50,000 a year and can save up to Rs 46,800 a year in taxes.

Furthermore, ELSS is the only kind of mutual funds eligible for tax deductions. These funds come with a lock-in period of just three years, which is the shortest among all tax-saving options. ELSS offers the dual benefit of tax deductions and wealth accumulation, thanks to its exposure to equity. These funds are capable of providing inflation-beating returns, and hence, can be used as a means for long-term financial planning.

2. What is SIP?

Systematic Investment Plan (SIP) and lump sum are the methods of investing in mutual funds. Among these two, investors prefer investing via a SIP as it allows them to invest a small amount on a periodic basis. The frequency of a SIP can be weekly, monthly, quarterly, or bi-annually, as per the comfort of an investor.

Moreover, the ticket-size of the SIP is decided by the investors and the fund houses have no say in this. However, one cannot invest less than the minimum investible amount set by the fund house. Investing in mutual funds via SIP is a preferred option as it offers the much-needed comfort for the investors. They don’t need to arrange for a lump sum to make investments in mutual funds as they have an option to invest through SIP.

3. Comparison of ELSS with SIP

Now that we have understood what SIP and ELSS are, let’s see how they differ from one another in the following table:





Investment vehicle in itself



Tax deductions

Yes, up to Rs 1,50,000 a year

Yes only when being invested in ELSS

Lock-in Period

Three years

No lock-in if not being invested in ELSS

Switch Option

Not possible until the lock-in period has elapsed

Possible if not being invested in ELSS

4. Conclusion

ELSS is an investment vehicle in itself while SIP is not, it is instead a way of investing not only in ELSS but also in any other mutual fund. Therefore, ELSS cannot be compared with SIP as it’s not an apple to apple comparison.

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