Published: 2026-06-17 · By Bhanuprakash Sardesai
15. ELSS Tax-Saving Funds: Save Tax Under Section 80C While Building Wealth
Equity Linked Savings Scheme (ELSS) is the only category of equity mutual funds eligible for tax deduction under Section 80C of the Income Tax Act. You can claim a deduction of up to ₹1.5 lakh per financial year by investing in ELSS, potentially saving up to ₹46,800 in taxes (if you're in the 30% bracket).
ELSS funds have the shortest lock-in period among all 80C investment options – just 3 years, compared to 5 years for tax-saving fixed deposits and 15 years for PPF. Historically, ELSS funds have delivered 10-15% annualized returns over 5-year periods, significantly outperforming traditional 80C options like PPF (7.1%) and NSC (7.7%).
However, ELSS comes with equity market risk. Unlike PPF or fixed deposits, returns are not guaranteed. This is why ELSS is best suited for investors with at least a 5-year horizon. If your 80C limit of ₹1.5 lakh is already exhausted by EPF contributions and life insurance premiums, you may not need ELSS specifically for tax saving. But if you have room under 80C and want equity exposure, ELSS is an excellent choice.
When selecting an ELSS fund, look at the same parameters as any equity fund: long-term track record, consistency, expense ratio, and fund manager experience. The growth option is more tax-efficient for long-term investors. You can instantly estimate your future returns using our free online SIP Calculator to see how ELSS investments can grow over time.
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