You can save tax by investing in ELSS (Equity Linked Savings Scheme) mutual funds under Section 80C of the Income Tax Act if you are filing taxes under the old tax regime. ELSS funds are one of the most popular tax-saving options for Indian investors because they combine tax benefits, wealth creation, and the shortest lock-in period among all 80C investments.
How ELSS Helps You Save Tax
- Tax Deduction up to ₹1,50,000 (Under Old Tax Regime)
You can claim a deduction of up to ₹1.5 lakh per financial year under Section 80C by investing in ELSS.
This can reduce your tax outgo by up to ₹46,800, depending on your tax bracket. - Shortest Lock-In of 3 Years
ELSS has a 3-year mandatory lock-in, the lowest among 80C options like PPF (15 years), NPS (till retirement), and tax-saving FDs (5 years). - Potential for Higher Returns
Since ELSS primarily invests in equities, it has the potential to generate higher long-term returns compared to traditional tax-saving instruments. - Option to Invest via SIP
You can invest in ELSS through SIPs, making tax planning easier and spreading your investment through the year. - Taxation on Redemption
ELSS redemptions after 3 years are treated as long-term capital gains (LTCG).- Gains up to ₹1,25,000 per year are tax-free.
- Gains above that are taxed at 12.5% + cess.
Validity Under Old vs. New Tax Regime
- Old Tax Regime:
ELSS investments qualify for Section 80C deductions, making them a powerful tax-saving tool. - New Tax Regime:
Section 80C deductions are not available, so ELSS does not provide any tax-saving benefit under this regime.
Why ELSS is Popular for Tax Saving
- Combines tax benefit + equity growth
- Helps in long-term wealth creation
- Ideal for young earners and first-time investors
- Suitable for SIP-based, goal-oriented financial planning
ELSS is a smart way to save tax and build wealth—especially under the Old Tax Regime.
Since tax rules are dynamic and subject to change, we recommend consulting your tax advisor for the latest and detailed guidance.
