Section 80C Mutual Funds - Complete Information
Under Section 80C of the Income Tax Act, taxpayers can save a sizeable chunk on tax, depending on what they invest in. As per the provisions laid out in this section, individuals can avail of tax deductions up to Rs. 1.5 lakh by investing in a range of tax saving or investment options.
Among the best investment options available to both salaried and self-employed individuals are Equity Linked Savings Scheme Mutual Funds (ELSS), which offer individuals the dual benefit of tax deduction as well as wealth creation.
Features of ELSS Mutual Funds
ELSS Mutual Funds come with a number of attractive features, making it a wise option to invest in:
- Low lock-in period of 3 years, which is considerably less than any other investment option under Section 80C.
- Investors can avail of tax deduction up to Rs. 1.5 lakh under Section 80C
- Any gains earned through ELSS Mutual Funds are exempt from tax
- Offers investors high earning potential by exposing them to equity markets
- Withdrawals made from ELSS Mutual Funds are also exempt from tax
- Investors have the opportunity to earn dividends during the lock-in period
- Individuals can invest in ELSS Mutual Funds with as little as Rs. 500, with no maximum limit
Top ELSS Mutual Funds 2025
The top 10 ELSS mutual funds in 2025 are listed in the table below:
Name of fund | 3-year returns (p.a.) |
Quant Tax Plan | 19.86% |
SBI Long Term Equity Fund | 19.82% |
HDFC Taxsaver Fund | 19.06% |
Bandhan Tax Advantage (ELSS) Fund | 18.19% |
Parag Parikh Tax Saver Fund | 18.06% |
Motilal Oswal Long Term Equity Fund | 17.13% |
Franklin India Taxshield Fund | 16.85% |
Kotak Tax Saver Fund | 15.81% |
Mahindra Manulife ELSS Fund | 15.24% |
Nippon India Tax Saver (ELSS) Fund | 15.23% |
Points to Remember before Investing in ELSS Mutual Funds
Take a look at the key factors to keep in mind before investing in ELSS mutual funds:
- Financial objectives: Establish your financial objectives and the way in which ELSS fits into your investment plan. Three years is the lock-in period for ELSS investments, so be sure your goals and investment horizon line up.
- Fund performance: Assess the ELSS funds and their past results. Evaluate the fund's historical returns, but keep in mind that past performance does not guarantee future outcomes. Check the consistency of return delivery from various funds.
- Risk level: ELSS funds make investments in volatile equities. Make sure you are comfortable with the possible fluctuations in the market by evaluating your risk tolerance.
- Expense ratio: The yearly cost of managing the fund, represented as a percentage of the fund's assets, is known as the expense ratio. Selecting a fund with a lower expense ratio is crucial because a higher ratio can result in reduced returns.
- Diversification: Examine the investment portfolio of the fund to make sure it is evenly distributed among several industries and stocks. Diversification aids in risk distribution.
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