Paying taxes is sometimes considered a burden as one has to pay them just because he earns a good sum of income. Most of the country’s citizens do not find taxes viable, and therefore even try to evade them. But why should we fall into illegality when we have the option to legitimately save taxes? Yes, you heard that right, as Section 80C of the Income Tax Act, 1961, provides for tax deduction on total taxable income up to an amount equal to Rs.1.5 lakh in a financial year. Among the various financial instruments, ELSS is one of the categories of equity mutual funds that offer such a benefit. Consequently, one can reduce taxes up to Rs 46,350 in a year by investing in the best ELSS funds. So you don’t need to opt for tax evasion, but invest in the best tax-saving stocks to take advantage of your income deductions.

There are various instruments that provide 80C deduction to investors in India including Fixed Deposits (FD), Public Provident Fund (PPF), National Pension Scheme (NPS), LIC Policy etc. All of these have various benefits, but the best among them is the ‘ELSS Mutual Funds’. By providing multiple advantages to investors, they help gain capital appreciation along with tax savings. Here you will find the characteristics of the ELSS funds that differentiate them from the rest.

1. Minimum lockout period – In the case of the Equity Linked Savings Scheme (ELSS), the blocking tenure is the smallest compared to the other tax savings instruments. One needs to stay invested for only three years in the ELSS schemes to avail the benefits and can redeem the funds immediately after the stipulated time expires.
2. tax advantage – As per section 80C of the Income Tax Act, investors who park their money in ELSS can avail tax deduction up to Rs.1.5 lakh in a taxable year on total taxable income. With this, you could reduce the tax burden to a great extent.
3. capital appreciation – By investing funds in stocks and equities, ELSS mutual fund schemes offer the opportunity for capital growth over a longer period. As the minimum investment tenure in this category is three years, the money invested has the opportunity to generate higher returns in the market. Furthermore, the fund managers also have enough time to rebalance the investors’ portfolio as per the requirement.
4. Tax Free Returns – Investments made in the best ELSS funds also provide the benefit of tax-free returns. Interest or dividends earned on the securities are not taxable in the hands of investors. In addition, the capital gain obtained at the time of the sale of the funds is completely tax-free. Therefore, investors do not need to pay taxes on the income from such investments.
5. Investment with a small amount – The minimum investment amount in the case of ‘Equity Linked Savings Scheme’ is only Rs 500. From now on, one can start investing with such a small amount to reap the benefits. The SIP plan in ELSS makes it more convenient for investors to make safe investments on a regular basis and take advantage of tax deductions at the end of the financial year. With this, one can achieve long-term financial goals and at the same time reduce the tax liability.
6. No limit for maximum investment – There is no limit for investors to make a maximum investment in ELSS funds as in the case of PPF. You can invest as much as you want to get the stock portfolio advantage and gain wealth over time.

Therefore, it is certainly safe to say that ELSS mutual funds occupy an important position among all tax-saving instruments under section 80C. Investors eager to reap the twin benefits of tax savings and capital growth should invest in these plans.