An Equity Linked Savings Fund (ELSS) gives you an income tax benefit because there is a lock in of three years. The lock in means that you as an investor are willing to stay invested and hence ‘deepen’ the capital markets.
With more such people coming in, the capital markets will make it easier for companies to raise funds and hence increase economic activity resulting in more jobs and growths. That is the broad logic here!
Funds that don’t have a lock in do not get the tax benefit.
As an investor, this doesn’t make much of a difference if you are willing to stay invested for the long term. If you need the tax benefit, then do invest in ELSS funds.
However if you are already sorted out on the tax savings investments, then invest in other ‘open ended’ mutual funds which do not have a lock in. This gives you more flexibility to exit a fund if it is not performing too well or for other life goals.
Whatever fund you invest in, make sure you do so only int he direct plans. Choose a platform that aggregates direct plans of mutual funds only (you get upto 40% more as there are no brokers or distributors eating away trail commissions).
Jama.co.in is a good solution out there that helps you with fund selection, risk profiling and a host of features like family portfolio, systematic plans etc. (disclosure: I work for Jamā).
