ELSS vs. Index Funds: Tax Savings or Low-Cost Growth?

• Index funds are more popular with 345 schemes and ₹3.20 lakh crore AUM, compared to ELSS funds with 42 schemes and ₹2.53 lakh crore AUM.
• ELSS funds offer tax savings under Section 80C and equity exposure, while index funds track market performance at a lower cost.
• ELSS funds have a mandatory 3-year lock-in period, whereas index funds offer liquidity with no lock-in period.
• SEBI approved passive ELSS funds in May 2025, expanding options beyond traditional actively managed ELSS.
• The choice between ELSS and index funds depends on individual tax status, investment behavior, and whether tax savings or low-cost, stable returns are prioritized.

Why It Matters: It helps investors choose between ELSS for tax benefits and index funds for market returns.