ELSS funds are the only mutual fund category that qualifies for Section 80C. You can claim up to ₹1.5L/year as a tax deduction, and the money still goes into equity. 3-year lock-in is the only catch.
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Equity Linked Savings Scheme — a mutual fund category that invests primarily in equity, with one unique feature: investments qualify for tax deduction under Section 80C, up to ₹1.5 lakh per year.
The trade-off: ELSS funds have a 3-year lock-in. You can't redeem any unit within 3 years of the investment date. For a SIP, this means each monthly investment has its own 3-year lock-in clock.
If you invest ₹1.5 lakh in ELSS in a financial year and you're in the 30% slab, you reduce your taxable income by ₹1.5 lakh — saving ₹45,000 in tax. The actual money you invest still belongs to you and grows in the market.
This is why ELSS is often called "double duty" — you save tax AND build wealth. Compare to PPF (which also saves tax but earns ~7.1%) and ELSS historically wins on long-horizon returns. But PPF is risk-free; ELSS is market-linked.
The full 80C menu: EPF (auto from salary), PPF (~7.1%), ELSS (market-linked), 5-yr tax-saving FD (~6-7%), NSC (~7.7%), life insurance premiums, home loan principal, kids' tuition.
For long horizons (10+ years), ELSS historically outperforms the others. The 3-year lock-in is the shortest of any 80C investment. Talk to Archita if you want to plan the 80C mix properly.