A Best Way To Save Tax

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Ways To Save TAX in 2021

If you are looking forward to find best way to save TAX then you are at the right place. 
In this blog, we will dive deep into the various aspects of ELSS mutual funds and understand the product via a case study. So, let’s cut the chase and get started.


Mr Rahul is a financial advisor who is helping his client Mr Dev in decoding the product ELSS and below is a conversation relating to the same.

Dev– I want to invest in a product which offers me tax benefit as well as a healthy capital appreciation.

Rahul– Why not? In that case, ELSS would suit your needs perfectly.

Dev– Could you please elaborate?

Rahul– ELSS is a type of equity mutual fund which stands for “Equity Linked Savings Scheme”. The fund manager commits 80% of the AUM to equities, so I would suggest this product only if you have a moderate risk appetite because unlike PPF/NSC your capital, in this case, is subject to market fluctuations and thus it has the capability to generate higher returns over a long term.

Dev- Yes I can assume that risk.

Rahul– Good!! Another point worth noting is that you can claim a deduction up to Rs 1.5 Lakhs under Section 80C. Thus, it should take care of your tax planning. When you redeem the funds, they will be taxed as long-term capital gains, and you will have to pay 10% of the capital gain above Rs 1 lakh without indexation. The best part of ELSS funds, unlike PPF, is that you need not commit Rs 1.5 lakhs every year to claim the deduction, you can invest 1.5lakhs every year for 3 years and roll the money over infinitely. However, if you opt for the new tax regime, you won’t be allowed to claim the deduction.

Dev– That’s That’s great!!

Rahul– ELSS compared to other products like PPF,NSC,5 year FD has the lowest lock-in period of only 3 years however I would suggest you to hold the ELSS for a period of at least 5-7 years because equities by nature tend to be volatile in the short run and usually provide stable returns in the long run and in case you wish to start a SIP then keep in mind that each SIP will have a waiting period of 3 years.

Dev– In that case will not ULIP be a better option? 

Rahul– ULIPs invest in mutual funds on your behalf meaning that you will have to bear the expense ratio of the mutual funds as well as the mortality charges of the ULIP plan meaning you will be paying a hefty amount in expenses which if compounded over the years can cost you a lot of money.

Dev– ELSS sounds to be an interesting option. I will surely consider all the above points you mentioned before investing in ELSS.


ELSS is just like any other product which has its own pros and cons. In conclusion, we would say that ELSS can generate high returns in the long term and various aspects of this product make it an attractive option to invest.

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