Tax Saving Mutual Fund

Tax saving schemes are mutual fund schemes that qualify for tax deductions under Section 80C of the Income Tax Act. These schemes are also known as Equity Linked Saving Scheme (ELSS) or tax planning or saving mutual funds. Investors can park money in these schemes and claim tax deductions of up to Rs 1.5 lakh under Section 80C.

Advantages of Tax savings (ELSS Funds)

A minimum of 80% of the total investible corpus is invested in equity and equity-related instruments

The fund invests in equity in a diversified manner – across different market capitalizations, themes, and sectors.

There is no maximum tenure of investment. However, there is a lock-in period of three years.

Tax exemption on the invested amount under Section 80C of the Income Tax Act.

Income is treated as LTCG and taxed according to the prevalent tax rules.

Tax Saving Mutual Funds ELSS vs PPF vs FD

Particulars ELSS PPF FD
Investment Eligibility Any Individual Taxpayer including NRI’s Resident Indian individuals Any Individual Taxpayer including NRI’s and HUF
Investment Amount Rs.500 up to No Limit Rs.500 up to Rs.1.5 lakh Rs.100 to up to Rs.1.5 lakh
Lock-in-Period 3 years 15 years 5 years
Tax on Returns Taxable Tax-free Taxable
Investment Option Medium to Long Term Long Term Medium to Long Term
Risk Factor Risk associated No Risk No Risk
Tax Saving Benefit Rs.1.5 lakh as specified under Section 80C of Income Tax Act, 1961 Rs.1.5 lakh as specified under Section 80C of Income Tax Act, 1961 Rs.1.5 lakh as specified under Section 80C of Income Tax Act, 1961