Equity linked savings scheme under section 80c of the income tax act.

Equity-Linked Saving Scheme (ELSS) is a type of mutual fund that is eligible for tax deductions under Section 80C of the Income Tax Act in India. These funds invest primarily in equity shares of companies, and have a lock-in period of 3 years. This means that an investor cannot withdraw their investment before the completion of 3 years from the date of investment.

ELSS funds are considered to be a tax-saving investment option as they offer a higher potential for returns as compared to traditional fixed deposit (FD) or Public Provident Fund (PPF) schemes, but also come with higher risk as they invest mainly in equity shares.

Investment in ELSS funds can be claimed as a deduction from gross total income, up to a maximum limit of Rs 1.5 lakhs per financial year. This means that if an individual invests Rs 1.5 lakhs in ELSS funds in a financial year, they can claim a deduction of the same amount from their gross total income for the purpose of computing income tax liability.

ELSS funds are diversified, and the investor does not have to pick stocks. It’s a good way to save tax and also get good returns.