ELSS Funds: How to Save ₹60,000 in Taxes While Creating Wealth

Introduction

Equity Linked Savings Schemes (ELSS) are the only equity mutual funds that offer tax benefits under Section 80C, making them one of the most efficient ways to reduce taxable income while creating long-term wealth.

Most people know they can save up to ₹46,800 in taxes.

But few realise that in higher surcharge slabs, the tax saved can cross ₹60,000.

Here’s the clean breakdown.

1. How ELSS Saves You Taxes

ELSS funds fall under Section 80C, which allows a deduction of up to ₹1.5 lakh from taxable income.

Tax Saved = Your Tax Rate × ₹1.5 lakh

This means your tax benefit depends on your income slab + surcharge applicability.

2. Maximum Tax You Can Save

Here are the tax savings across income slabs (old regime):

Income Slab Effective Tax Rate Max Tax Saved (on ₹1.5 lakh)

10% 10.4% ₹15,600

20% 20.8% ₹31,200

30% 31.2% ₹46,800

30% + 25% surcharge ~39% ₹58,500

30% + 37% surcharge (ultra-high income)** ~42.74% ₹64,116

**So yes — the maximum tax saving is NOT always ₹46,800.

It can go up to ~₹64,000 for high-income individuals.**

(Note: Surcharge rates depend on old regime & income thresholds.)

3. Why ELSS Is Better Than Other Tax-Saving Options

Compared to instruments like PPF, FD tax savers, NSC and ULIPs — ELSS offers:

A. Shortest Lock-in

ELSS: 3-year lock-in

PPF: 15 years

NSC/Tax-FD: 5 years

B. Higher Long-Term Returns

Being equity-linked, ELSS historically outperforms traditional tax-saving products.

C. SIP + Lump Sum Flexibility

Perfect for salaried investors and business owners.

4. Who Should Choose ELSS

ELSS is ideal for:

Salaried individuals using 80C fully

Investors targeting long-term equity growth

Anyone wanting tax savings + wealth creation

People looking to shift from insurance-based 80C choices

Avoid using ELSS if:

You need guaranteed returns

• Your risk tolerance is low

You need liquidity within 3 years

5. How ELSS Creates Wealth Over Time

Equity compounding is the real advantage.

Example:

Investing ₹1.5 lakh every year in ELSS for 10 years, assuming a 12% CAGR, becomes:

Total invested: ₹15 lakhs

Value after 10 years: ~₹31.1 lakhs

Tax savings + wealth creation → dual benefit.

6. How to Choose the Right ELSS Fund

Professionals evaluate:

• Rolling returns

• Portfolio quality

• Risk ratios (Sharpe, Standard Deviation)

• Fund manager track record

• Consistency vs benchmark

Avoid selecting ELSS just based on 1-year return — it often leads to wrong choices

Recommendation:

Use SEBI-registered advisors through Zdvisor for clean, objective, data-backed selection:

👉 https://app.zdvisor.com/z

Conclusion

ELSS funds remain the most efficient 80C investment, balancing:

• Tax savings

• High return potential

• Shortest lock-in

• Long-term wealth creation

While most investors only think of the ₹46,800 tax benefit, the actual savings can be as high as ₹64,116 for high-income individuals.

If you want to choose the right ELSS fund — based on risk, goals, and market cycles — consult verified SEBI-registered advisors through Zdvisor.

Citations

1. Income Tax Department – Section 80C Deduction Guidelines

2. CBDT – Surcharge & Cess Rates

3. AMFI – ELSS Mutual Fund Category Rules

4. RBI – Retail Investment & Wealth Insights

5. Morningstar – Long-Term ELSS Performance Data

Frequently Asked Questions (FAQ)

1. Can ELSS really save more than ₹46,800 in taxes?

Yes. With surcharge slabs, savings can go beyond ₹60,000.

2. What is the lock-in period?

ELSS has a mandatory 3-year lock-in.

3. Is ELSS risky?

Yes — it is equity-based. Suitable for long-term investors.

4. Is SIP better or lump sum?

SIP offers better volatility management; lump sum works during corrections.

5. Should I stop other 80C investments for ELSS?

Not necessarily. But ELSS is the best option for wealth creation + tax saving.